Analysis: What future is there for rural petrol stations?
Many fuel stations did well last year as more people shopped locally
Fuel forecourts face being left behind amid the rollout of EV charging infrastructure
The year is 2035. You’re driving a brand new electric car and you glide into a nearby forecourt. What does it look like? If it’s a large chain establishment, you can expect to be greeted by a fleet of chargers, a small supermarket store and a large car park. But if it’s a smaller, independent forecourt, especially in a rural area, the scene will be different. In fact, it might not exist at all.
At first bite, this sounds melodramatic. Historically, petrol stations have been struggling for several years. From a peak of around 35,000 in 1980, there are now just over 8000, according to the latest figures from the Petrol Retailers Association (PRA).
The pandemic directly caused around 100 stations to pause sales last year. As of 2019, 70% of independent filling stations that were operating in 2000 have shut their doors permanently.
But according to Gordon Balmer, the commercial manager for the PRA, many of those forecourts that survived the pandemic have not just survived but thrived. “Before the pandemic, the cumulative average growth rate [for convenience retail] was about 4% year on year,” he says. “The pandemic has actually accelerated it: it went up last year to around 6%.”
Lockdown rules forced consumers to shop more locally, and with more and more forecourts now offering what Balmer describes as “world class” food and retail facilities – including one Scottish station that even offers a cigar tasting service – the pandemic created something of a perfect storm.
“We’re a world away from mouldy sausage rolls,” Balmer says. “When people have gone to their fuel station to buy food, they’ve found that they’ve not only got what they want, but they’ve got it at a good price. Our members have done extremely well.”
Petrol stations have been supplementing pressured fuel sales with retail arms for many years, but as a rule, those with the most developed retail offerings tend to be larger brands. Smaller, rural stations have tended to struggle to provide the same services. David Charman, owner of an award-winning rural forecourt in Parkfoot, Kent, says: “The loss of fuel sales puts an awful lot of pressure on particularly small rural forecourts. The Tesco Expresses of this world are much better set up to deal with convenience than the small rural store.”
Another major challenge faces the owners of small and rural stations: electrification. The global push towards replacing fossil fuels with electricity has caused problems with adapting this new focus to a winning business model, particularly for rural forecourts. There are issues with logistics and, relatedly, cost, not to mention technology, and Charman doesn’t gloss over these.
“Put frankly,” he says, “I think there’s no possibility of rural service stations becoming charge hubs for electric cars. You’ve got to go where the electricity is, not where the petrol station is, because there are cars now that require 270kVa of equipment to fastcharge or super-fast-charge really, really quickly. And certainly 150kVa is becoming the norm. Realistically, few petrol stations have that kind of capacity of electricity available. They can’t reinvent themselves to where the industry is going.”
There is also a problem of cost. Although prices vary, the average cost of installing electric charging facilities at a forecourt runs to around £100,000 for just a small number of active chargers. Even that figure is out of reach for a small, rural establishment with low capital.
Return on investment is a sticking point. Balmer says: “You’re asking a single site operator – that could be a husband and wife partnership or family business – to invest the thick end of £100k into a charging point. If they’ve got that sort of money, they’d probably be better off buying a car wash or improving the shop, to be frank with you, because the return is not going to be there for a while to remunerate that investment, certainly not in electric charging.”
Governments and industry are not blind to the problem. Last year, Boris Johnson’s government announced a £950 million ‘Project Rapid’ scheme to help fund the installation of charging points at motorway service stations and reduce the costs for operators connecting to the grid: in short, to make electrification more affordable.
Likewise, since this year, the Welsh government has been working with retailers in “remote and rural areas” to install rapid charging locations, where fuel stations otherwise wouldn’t be able to afford to install them. Eleven are currently set to be rolled out, and there “are plans for further schemes to follow”.
In terms of the private sector, the oil giant Shell began trialling on-site batteries as a way of boosting electricity for rural sites with limited access to the national grid, which is required for rapid charging. The system works similarly to bidirectional or vehicle-to-grid charging: Shell’s trial site in the Netherlands is fitted with a 360kWh battery that stores electricity to increase capacity.
However, Balmer and Charman express concerns about these initiatives. Balmer stresses that while Project Rapid looks good in theory, “what the government hasn’t said is who’s going to pay for the charging points, so there’s a significant chunk of money that needs to be found in order to do that”.
Charman says: “I’ve heard about the idea that you could bury a huge quantity of batteries at your sites, which could then be charged up overnight with cheap if not free electricity that was being generated from a wind farm, say, and then it could be stored and used during the day to charge up vehicles.” However, he stresses that there remain questions to be answered around return on investment.
If petrol is a dying force and electrification is incompatible with rural forecourts, what, then will be the state of rural stations in the future? In short: the outlook is not positive.
“Government grants have encouraged locations in the past, for example, in the Scottish islands,” says Charman. “But ultimately a business can only survive with investments. If you’re unable to convince anybody to lend you money to make an investment in your business because of the decline of this, that, and the other, your business will fail. There’s no overnight solution for that. The whole car industry is going to need to redefine itself, and it’s going to take an awful lot of assistance for that to happen.”
Whether or not rural forecourts will really get this assistance remains to be seen. But their futures, at least as fuel retailers, will increasingly depend on it.
*Parkfoot: At your convenience*
Parkfoot Spar forecourt in Kent is an award-winning rural station that moved into retail in a big way and is now reaping dividends. As well as a Spar shop, the Parkfoot site has a bakery and kitchen, and even a butcher who sells locally sourced meat. “In the past year, the butchers [West Malling Butchers, Kent] has been the best part of our business,” says Parkfoot boss David Charman. “As people couldn’t get to eat in restaurants, they’ve taken to eating at home and therefore we’ve seen that part of the business increase”.
Parkfoot even offers florist-sourced flowers. “We take our flowers from an award-winning florist just up the road,” says Charman. “They had capacity at their store. We rely upon and maintain their good name and their wonderful flowers.”
While the Covid-19 pandemic has impacted Parkfoot’s fuel sales and brought challenges for parts of its operations, it has boosted demand for its food products and given Charman access to new suppliers. “One of the things that has happened is that we’ve been able to purchase directly from farms around us, which we could never do before.
Previously, we might have seen a lettuce go from half a mile away from our store, all the way to London where it was purchased in the market, back to Maidstone where it went to the wholesaler, and on a van to come back out to our store. Now it’s coming straight to our sites.”
Retail is at the core of Parkfoot’s business model. “We find now it’s our shop and people doing their shopping that attracts people to our forecourt. We’re now really a convenience store that sells fuel,” Charman says.
*READ MORE*
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