Oil retail outlets emerge as the new battlefield

Petroleum retail marketing will shift from commodity marketing to retail outlet branding, oil industry leaders said at a workshop organised by the Indian School of Petroleum (ISP).

A regulatory body was urgently needed to fix the rules of the game in the retail market, they added.

"There is urgent need for a regulatory body on petroleum retail marketing as Reliance Industries Limited (RIL) and Essar Oil Limited (EOL) penetrate the market earlier held by public sector undertakings (PSUs), and number of retail outlets and entities running outlets increase. The body is needed to decide rules of the game and chalk out guidelines on pricing of products sold in retail," said Rajiv Kant Chaturvedi, chief operating officer (petro-retail) of Reliance.

Expressing concerns on deregulation, Chaturvedi said deregulation seemed some way off. In a free market, there should not be a mechanism requiring government or regulatory approvals for marketing plans of petroleum companies.

He said entities like The Royal Dutch/Shell Group would soon start retailing fuel. Outlets would have to look beyond selling fuels and offer additional facilities to win over customers.

A M Nanjundan, executive director (retail development) of Indian Oil Corporation Limited (IOCL), said commodity type marketing of petroleum products was on its way out.

Dependence on retail outlet branding was rising, with offers of premium branded fuels and loyalty programmes.

New factors were becoming important, like non-fuel value proposition, fast food centres, bakeries, sales of beverages from outlets, ATMs and other services at retail establishments.

Retail gross margins would vary from market to market. Nanjundan said it was likely companies would offer competing rates on retail pricing of petrol and diesel.

IOCL would try to avoid price reductions and discounts and seek to retain customers through other means. The retail sector would be critical for survival of all oil companies.