I’ve read several articles now about the new on-demand fuel companies that are popping up across the country. Recently, Doug Haugh had a good article that profiled 11 of these companies. The general feedback I hear mostly discounts these companies’ ability to upend the industry, and on that point I am in agreement.
However, there is no need for these companies to disrupt the industry to succeed. As Doug pointed out, the fuels industry in the US is over half a trillion dollars. How much of the pie do you need to be considered successful? This brings me to my point – many tend to think about new business ideas in terms of winner-take-all scenarios. I’m guilty too. So I tried to think of an analogy in the business world and pizza came to mind.
Papa John’s has over 4,700 establishments around the world, including around 3,500 in the U.S. I think by anyone’s standards this company has been very successful. Was Papa John’s a disruptor to the pizza industry? For all the growth this company has enjoyed over the 33 years since the founder started with one location in Indiana, it’s only the 4th largest pizza chain in the US (Pizza Hut is #1 in case you are wondering). Do you still have local pizzerias in your town? I can think of dozens of places to get pizza – including my local convenience store. I would argue that rather than being a disruptor, Papa Johns was a segmentor. They identified a segment of the market, customers that wanted pizza delivered to them and were willing to pay for it, and served it.
There will be customers that are willing to pay to have fuel delivered to them too. How large this market will be is anyone’s guess. But I think it might be bigger than most would imagine. Often times I hear the world “luxury” used with on-demand services. Consider this: the average hourly earnings for employees in the US for May 2017 was $26.22, according to the Bureau of Labor and Statistics. Using that number we come up with a minute figure of $.43. Now, it doesn’t take long for those minutes to add up and equal dollars. I think most consumers are very rational and will spend their time and money the best way they can. Will they choose to use this service? Time will tell.
What do you think?
Continue reading…Part 2 – Déjà Vu All Over Again