Coles’ surprise announcement this week to quit the gas station game makes perfect sense, retail experts say, as fuel suppliers grapple with an uncertain economy and a future of electric vehicles.
The supermarket giant revealed on Wednesday that Viva Energy, the company that already operated Shell-branded boosters, will buy its 710 Coles Express stores across the country.
This decision may seem confusing, as supermarkets are increasingly investing in convenience stores due to the high cost of urban locations and consumers buying fewer items at a time. But retail experts say it’s a smart move to cut future costs.
Woolworths sold its 540 refueling points to EG Group for more than $1.7 billion in 2019.
Selling a “smart move”
Gary Mortimer, consumer and retail expert at Queensland University of Technology, said unloading petrol stations was a smart move by the supermarket heavyweight, given competition in the food sector. convenience stores and the effect of fuel prices on consumer spending.
While Coles Express will eventually be rebranded, Coles will continue to supply its own range of branded goods to service stations – just like in rival Woolworths’ deal with Caltex and Ampol.
Customers will also have access to the retailer’s Flybuys program and a four cents per liter fuel book discount.
This means that Coles and Woolworths are still making money from their product lines without having to deal with fuel prices or service stations.
“The convenience store industry is a highly competitive industry, with many major players like 7-Eleven in the market,” Dr. Mortimer said.
“The challenge of running a gas station or convenience store business is that a lot of the revenue from your store’s sale is tied to the price of fuel.
“We know that when fuel prices rise, consumers are less likely to… make a purchase in-store. So it’s a bit more difficult to manage than a basic supermarket.
Coles’ sale of its fuel and convenience stores means the retailer will be on the hook for $816 million in lease debt, fuel price pressures and renovations needed to keep up with the future of electric vehicles in Australia.
Louise Grimmer, retail specialist at the University of Tasmania, said The new daily Coles’ decision reflects the challenges Coles Express has faced throughout the pandemic.
The Coles Group 2022 annual report revealed that blockages in the first half of the financial year led to reduced fuel volumes. The resumption of Coles Express outlets has been delayed as the flooding coincided with rising global fuel prices.
More than 30 Coles Express sites were closed due to flooding, with three remaining closed at the end of the financial year.
“This move allows Coles to reduce risk across its portfolio and focus on its strengths in food and alcohol sales,” Dr. Grimmer said.
Brian Walker, Founder and CEO of Retail Doctor Group, said that by choosing to specialize in the food and grocery market, Coles could also save itself the costs of growing demand for vehicle infrastructure. electrical.
Although there is not yet a huge market for electric vehicles in Australia as the country drags its feet on the adoption of electricity, the Albanian government has introduced legislative changes in parliament with the aim of encourage people to buy electric vehicles, and automakers are introducing more models for the local market.
By washing his hands of the fuel side of his business, Coles is saving himself the trouble of following the direction Australia’s auto industry is slowly taking.
The transition to electric vehicles [means] space, gas tanks, all of that will change,” Walker said.
“It’s going to take funds and it’s going to take specialization to turn it around.”
The $300 million sale is expected to be completed by the end of this fiscal year, subject to regulatory approvals.