With oil barrel prices having dropped some 70% from their record high, the Oil and Gas industry has already started to feel economic challenges as their profits have plummeted. Is now the time for the industry to look at how other sectors are coping with the financial ‘squeeze’? One area to look to are UK supermarket retailers and how they have addressed their sudden and acute market challenges with technological solutions.
Over the past three years budget supermarket chains Aldi and Lidl have doubled their market share, dragging the large established supermarkets into a price war. Given traditionally low margins in retail, the 1.7% drop in prices during 2015 led to many retailers posting poor results, with Tesco making a record loss of £6.4B.
Internet of Things in Upstream
You might be forgiven for thinking that supermarkets have little to offer in the way of advice for upstream oil and gas, an industry characterised by its distance from its consumers, its inability to impact prices, and its asset management focus. Yet for supermarkets, spoilage of stock through events such as chilled cabinets malfunctioning impacts profitability in the same way as unexpected shut-downs of oil and gas assets.
US retailer Kroger has implemented an Internet Of Things (IOT) solution to automatically track cold and frozen food-case temperatures, and notify the store of changes. This saves money in several ways – it reduces food wastage and leads to energy saving whilst eliminating the need for manual checks.
Similar technologies could be used in productive oil and gas assets to remove the need for costly manual inspection rounds and gaining a real time view of all components in an asset. Coupled with the ability to use predictive technology to work out where equipment failure is likely to come, this could be used to reduce costly unplanned shutdowns.
Personalisation in Downstream Retail
Grocery retailers have been at the forefront of trying to understand their customers’ thinking and behaviours in order to drive up market share and loyalty. Whilst downstream petrol retailers are often seen as a retail sub-group (especially with team-ups such as Shell/Waitrose and BP/ M&S) this focuses chiefly on the sale of non-fuel items in service station retail outlets. Are there any learnings in how to increase brand loyalty and market share from the fuel being sold itself?
The cost of filling an average family car with petrol is not inconsiderable in the context of most household budgets. Fuel retailers should follow suit from their grocery cousins by forming a broad, single view of their customers on a retail location by retail location basis, in order to better inform pricing.
55% of food bought in the UK is bought on offer, yet it is rare to find the same promotional approach to the sale of fuel. Trends within grocery retail are to personalise promotions based on shopper behaviour and even current geographical location (aisle by aisle) in order to maximise trade spend effectiveness. In the context of fuel, identifying that a customer, via their phone’s GPS, is about to pass a service station and offering a real time deal (whether it’s on the fuel or other items), may prove effective in driving greater market share and brand loyalty. This could be taken a step further by teaming up with vehicle manufacturers to build such technology into cars and their navigation systems to advise the driver on when they need to fill up and what their options are for doing so.
Current low oil prices will drive technological innovation in the oil and gas value chain as the industry adapts to survive. Whilst the industry may seem quite unique from others such as grocery retail, there are certainly things that can be learned by looking at examples from other areas.
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Bluefin will be exhibiting at the International SAP Conference for Oil and Gas in The Hague on 12th-14th April 2016. Our team will be on hand to discuss your business needs, and advise how we can help you utilise your SAP landscape to deliver efficiencies and cost savings across your operations. Click here to discover more.