Growing the old-fashioned way
United Petroleum is a prime example of growing by knowing your customer — and competition — and then focusing on the key known drivers.
United has successfully leveraged its (commodity) oil business to provide an edge to the low margin chain of convenience stores it owns. Competitors in that business were major, fully integrated oil companies who are now all exiting the store business, such that united is now more integrated than any other in its geographies (without being a shell or Mobil).
It now faces new competitors, such as 7-eleven and Woolworths, both no strangers to retail — but United’s weapon has been its laser focus on what its customers value most —inexpensive petrol. With competitive petrol prices advertised outside each store, comparison shopping does not require mobile devices — only a car ready to gas up.
United combines old school and new tech to maintain its important competitive edge. Four times a day, each of United’s stations (all of which are franchises) physically sends someone out to observe posted prices at a specific set of local competitors. Prices are then sent electronically to a central system, where an algorithm based on certain protocols is applied and then pricing guidance is sent back to the stations.
And the company’s strategy of focusing on prices at the pump does more than just drawing more customers into their stores. Incidentally, united CEO Tom O’Brien, who admits he is “thankful you can’t buy fuel on the Internet,” says that their sales data shows that the lower petrol prices are, the more customers actually spend in the stores.
Another point of emphasis for united is corporate responsibility. In a low margin industry that is tightly regulated, and with a business model in which united is dependent on the compliance of their franchisees, adherence to corporately responsible policies is critical. As O’Brien says, “we don’t get to choose corporate responsibility as an issue, but we do choose how to handle it.”
United has an excellent track record, which is at least partially attributable to rigorous audits that are regularly conducted at each station with scores for health, cleanliness and safety. If scores are too low, “there is a serious problem,” and if they are repeatedly too low, “we would tend to use the stick more than the carrot.
”Finally, with respect to United’s growth prospects, O’Brien describes the opportunity in terms of three key retail categories that are emerging through “a continuous consolidation of sorts”: big box, or destination shopping stores; online — in which an increasingly wider range of products is available; and thirdly, convenience.
O’Brien predicts that as consumers buy more frequently online or at big box stores, the greater will be the need for a selection of everyday items, from bread to pet food, that can be purchased at convenience stores like united. As a result, O’Brien sees the convenience segment, and United’s role within it — using less expensive fuel as the magnet — as a growing one.
Headquarters: Victoria, Australia
Business: Operator of 320+ convenience stores and service stations
Employees: over 2,500
Brands: United, Sweeten Up, Drink Up, Power Up and Tech Up