Riding the vast network of petrol stations in India
One of the main challenges to last mile reach in rural areas is the cost of setting up physical infrastructure. Given this scenario, it was exciting to undertake a study on what allied services could potentially be offered through the vast, pan India retail fuel station networks of oil marketing companies. The aim of exploring this opportunity is twofold – address the needs of fuel customers and the surrounding rural community while also building brand strength, customer stickiness and potentially even increasing footfall. A couple of takeaways as to the advantages of ‘piggy-backing’ on this channel are below.
Strong distribution network and reach
India has an extensive network of approximately 45,000 fuel stations, with more than half belonging to the three state-run oil marketing companies (OMCs). Further, since 2011 these companies have started commissioning stations in areas that can be classified as rural, indicating a strategy to move beyond urban areas and towns.
Existing infrastructure and connectivity
Most petrol pumps have a basic infrastructure of buildings, electricity supply, generator back up, security and even internet connection in some cases. Products that need such infrastructure can achieve significant savings in terms of financial investment as well as time taken to ground services. This will certainly contribute toward keeping the cost of products or services at a level that remains affordable to the target segment, one of the main challenges of inclusive business.
Fuel stations are usually within a 3-5 km radius of their town or village, which make them easily accessible. Connectivity to roads and/or highways and the linkage established for regular fuel supply make it highly attractive and suitable to leverage as a distribution channel.
Nature of customers aligned with inclusive business target segment
Fuel stations see high footfall from truckers, farmers with tractors and short distance commercial vehicle (SDCV) operators. Besides this, there has been an uptake of vehicles for personal use in the rural areas, indicating that overall footfalls at fuel stations are likely to increase. The nature of customers visiting these pumps largely depends on the location; highway stations see a majority of truck drivers and heavy vehicle operators, while towns and rural areas cater to farmers, SDCVs and motorists. In both cases the income levels and occupations of the clients make them prime candidates for an inclusive business venture.
Other strategic advantages
Given the volume of transactions and cost of fuel, a fuel station dealer will almost always have a good availability of cash, which can be highly advantages for allied services like financial inclusion. Fuel stations also typically have long working hours; some are even open 24/7, which extends the availability of the allied service too. Finally, some OMCs enjoy a reputation of quality and trustworthiness as represented by their brand to the general population, making potential customers more likely to avail of services offered from their premises.
Proof of concept already exists
The concept of offering additional services from fuel stations is not a new one and has been successfully executed in urban areas. This gives validation to the model, although one must keep in mind that the needs and behaviour of a rural customer are very different from an urban one. It becomes especially important to conduct intensive needs assessment exercises when serving the lower income segment, as they tend to have unique constraints regarding awareness, cash flow patterns, price, payment options, comfort with the transaction environment, etc.
In conclusion, there are multiple arguments in favour of the model of collaboration, co-branding and partnership and particularly in favour of the fuel station channel of distribution. Going forward, the economies of shared capital investment, increased timeliness through quicker on grounding and overall optimisation of resources could result in multiple benefits, both economic and developmental, to all parties involved.