The switch to electric vehicles (EVs) could render up to 80% of existing gas stations unprofitable in markets that move away from fossil fuels rapidly.
That sobering statistic is according to research from the Boston Consulting Group. It’s unclear exactly how fast the United States will make the switch to alternative fuels, but pledges from governments and automakers to move away from sales of gas-powered vehicles are making the eventual decline of gasoline a certainty instead of a likelihood.
The switch to EVs will undoubtedly force American convenience stores and gas stations to rethink their business models, but many fuel retailers have proven they can withstand a loss of volume in the forecourt in the past year-and-a-half.
According to a fuel retail report from McKinsey & Co., many Americans frequented c-stores to avoid long lines at grocery stores during lockdown in 2020, with Royal Dutch Shell reporting that basket sizes had increased at its locations by 15% in 2020. The report also found Laval, Quebec-based Alimentation Couche-Tard’s Circle K stores more than made up for reduced traffic in the forecourt with in-store shopping trips.
This research indicates that c-store grocery offerings are in demand and there is a future for convenience retail as an on-the-go destination for food and home staples and a quick recharge.
The same report from McKinsey predicts that the long-term outlook for fuel retailers in the United States is due to decline. “This decline will be driven by efficiency improvements, regulations to curb emissions and the rise of electrification and shared mobility, with the relative importance of each factor differing by country,” it said.
McKinsey’s report also weighs other factors, including the proclivity of American consumers to travel by car, calling a personal vehicle the “ultimate in personal protective equipment.” The report predicts, however, that the rise of working from home and online shopping will also affect c-store traffic and sales.
Finally, the report outlines three trends that could shape the future of nonfuel consumption:
- Fresh and Frequent, referring to customers’ tendencies to cut down on weekly, out-of-town, shopping market trips in favor of small local stores.
- Delivery and On the Go, referring to the increase in online ordering of food for delivery and the rise in consumption outside the home.
- Frictionless Customer Experience, or the use of digital menu boards and contactless payment solutions in stores to streamline the shopping experience.
McKinsey predicts that these trends will converge to put greater pressure on the already fading “gas, Cokes and smokes” model of c-stores and gas stations. McKinsey’s report clarifies that its predictions could change depending on what entities become the “natural owners” of electric charging, be it oil and gas companies, power companies, independent private equity-backed firms or others.
Taken all together, McKinsey’s report suggests on-the-go charging could offer the best chance for existing fuel retailers looking to capitalize on EV charging. Marketing themselves as quick stops for consumers looking for a quick recharge makes use of c-stores’ existing network of locations and offers scope for growth, according to the report.