Recently, an announcement was made about Yoshi getting a round of funding led by corporate giants Exxon Mobil and GM. I started thinking about what companies might be interested in partnering with or even buying an on-demand fuel company. Here’s what I came up with…
Lets begin with the usual suspects. This list primarily consists of companies that already sell fuel or auto related products.
Major Oil (BP, Exxon, Shell)
Shell has already been doing some experimenting of their own in Europe with its TapUp startup and has plans to bring it to Houston. Also, Exxon is slowly wading in with an investment in Yoshi. We still haven’t seen any move from BP or the other majors – something that I expect will change in the near future.
These companies offer several advantages to the major oil companies:
1. On-demand fueling could potentially slow the transition from ICE (internal combustion engines) to electric vehicles by removing a pain point for auto owners – stopping at the pump.
2. It could allow for some differentiation in a commoditized business.
3. It could be a higher margin revenue stream from customers who are willing to pay a premium for the service.
4. These companies provide distribution. The big oil companies are well positioned to execute this business model by having the lowest product cost – enjoying a spread that the current operators in this space can only dream about.
5. Its great advertising. Imagine the branding opportunity of all those fuel delivery trucks rolling around town. They are going to have someone’s name on the side. Major oil spends big on advertising and it may not even need to be a profitable business unit if it increases awareness or business for the rest of the company.
This wouldn’t be the first time a product based company stepped into the on-demand service sector. P&G launched TideSpin in the Chicago market – offering its customers on-demand home laundry pickup and delivery.
C Store or Truck Stop Chain (Circle K, Casey’s, Wawa, Love’s Travel Centers)
If on-demand fueling gains any traction, it presents a real threat to the existing model of many convenience stores. Fuel is a big reason customers stop at the store – and the real money is made inside. A buyout could be a defensive move to stave off a new form of competition.
Delivery vehicles would also expand the reach of the business in a geographic area. A gas station is stationary, so it can only service people who are willing to drive to it. Also, there may be competing stations that already occupy the best real estate in town. The delivery model allows the company to seek out the customer as opposed to the other way around.
It may even allow a convenience store to enter a municipality with stringent permitting by side-stepping the process entirely (as I wrote about here).
On a somewhat related note, Pilot Flying J now has 150 mobile emergency trucks on the road in 36 states. Not hard to imagine a combination of road-side assistance and refueling in one.
Fuel Jobber (SunCoast Resources, RelaDyne)
These companies have been capitalizing on the fuel delivery model for decades. They are positioned perfectly to tap into an entirely new customer base by going after the consumer in addition to existing commercial accounts. They have access to the loading terminal, the personnel are in place (inside / outside sales, HazMat drivers, etc), and all the other “nut and bolts” of the business worked out (insurance, parking for trucks, etc).
A bonus for the Fuel Jobber is that these small trucks would be great as disaster response units. The mobility and size of the units could be very effective in emergency situations.
Auto Parts Store (Pep Boys, O’Reilly)
How many times have you let your wipers exceed their useful life just because you didn’t have time to replace them? Auto parts stores would sell more parts if they made it easy for their customers. A parts company delivering fuel could also swap out wipers, check the battery (and of course replace as needed), apply some Rain-X to the windows, install new floor mats, and hang an air- freshener on the mirror. All of the items could be ordered (or recommended) through the app and the customer never has to stop at a physical location.
As cars move towards electrification, there will be less moving parts in them. Less to break equals less to replace. Amazon sells auto parts too. Both are real threats to the auto parts companies. Buying an on-demand fuel company could give them a jump-start on diversifying their business before its too late.
Now, for the not so obvious companies…
Any Company With A Big Auto Fleet (Enterprise Car Rental, Charter Communications, FedEx, UPS)
One of my favorite articles written by Ben Thompson is about Amazon and how its the “first and best” customer for its own products. For example, Amazon Web Services (AWS) had significant upfront investment costs, but the company could justify it because it was its own best customer. Amazon then scaled by offering the service to outside companies.
Other companies could adopt this same model – using their own company fleet as its “first and best” customer.
What if Enterprise offered you a rental without the hassle of refueling? As you were parked at the hotel or having dinner, you simply pushed a button on the app and one of their trucks came by and filled up your vehicle (even more likely is that the vehicle’s OBD module broadcasts this info to dispatch and no action at all would be required by the driver). After fueling customers’ rentals during the day, the Enterprise fuel trucks would top off the cars at the rental lot during the night.
A big selling point for the traditional mobile refueling model is that drivers should be driving – not standing around at the gas pump. Fleets of service vans (ie. Charter) could be filled in the middle of the night so that workers are ready to drive off the lot the next morning without the routine stop to fill up (non-billable time).
An existing fleet could justify the upfront expense of acquiring the equipment (software, tank trucks, etc.), allowing the company to scale with business from the public.
Logistics Company (Amazon, Walmart)
I’ve already written about this here. Yes, it is a stretch but if you don’t have a package delivered to your home or office, where else would it go? How about the trunk of your car? Could free fuel delivery be the next perk for Amazon Prime customers?
Once you have the network in place (users, software, equipment) you can change the product you deliver over time. Today its fuel, tomorrow its ????
A Car Company (Ford, GM, Nissan)
Tesla has its own service network – a big selling point for their vehicles. The service truck comes to the customer, rather than the auto owner taking the car to a shop for service. Having a network of fuel delivery / service vehicles would allow other car companies to compete. It also creates a closer relationship between car company and car owner – a relationship traditionally managed by the dealership.
As car ownership gradual shifts from individuals to companies, its conceivable that the OEMs could have their own “rental” fleets. Look at what Ford is doing in NY with Chariot for a glimpse at what the future might look like. And VW announced they are getting in the ride-sharing business too.
A Ride Sharing Company (Uber or Lyft)
These companies have first mover advantage and serious app real estate. How many phones do you think these apps are installed on? It would be easy to add this additional service into their ride sharing app. All things being equal, who has a better chance at success – Uber which adds a fueling service to its existing app or a startup with a standalone app? It doesn’t take a financial genius to understand the impact that would have on the business model. Customer acquisition costs would plummet, as you already have an installed customer base. Product awareness and adoption would skyrocket.
This also embraces the “first and best customer” business model. In this case, Uber or Lyft’s drivers are now your best customers. Fuel expenditures could simply be deducted from what they are paid, similar to the way they provide rental cars for their drivers now.
A Scooter or Bike Sharing Company (Bird, Lime)
This sector is really hot right now. The big difference between these companies and the ride sharing companies is that the vehicles don’t self-allocate themselves to areas of demand. Someone has to redistribute all these scooters and bikes back to the places where they are most needed. It wouldn’t be hard to outfit the fuel trucks with bike / scooter racks to move them around town while they are making deliveries or headed back home. One piece of equipment doing two jobs equals better economics.
An Insurance Company (Geico, Nationwide)
Often when you think about complimentary auto products you think about fuel, tires, etc. One of the biggest ones is auto insurance. If you are ordering fuel on-demand, there is a good chance that you are the owner of a vehicle. Think about how much time and effort is spent by insurance companies to acquire new customers. Now, imagine in the fuel app you, as a user, receive an offer to switch insurance companies. Furthermore, imagine what data the insurance company gathered prior to “pitching” you as a new customer. Its possible they have some idea of miles traveled, areas you drive in, and maybe even your driving habits (assuming the app has location services). Using this data they can qualify who they want as potential customers.
Insurance companies offer roadside assistance. Why not fuel on demand too? As a side note, State Farm sponsors motorist assistance programs in cities like Atlanta (great brand exposure).
A Fleet Management Software Company (Verizon Connect, Omnitracs, Samsara)
Fleet management software has solved many problems for fleet managers. By looking at a dashboard the manager can instantly see where all their company vehicles are on a map. Many can tell if a vehicle is in need of preventative maintenance. What if one more feature of the software was an integration with a fuel supplier? Rather than one-click purchase, fleet managers would enjoy no-click purchases as the vehicles would send out low-fuel notices automatically to a fuel dispatch center. The first software provider to offer this service has just set itself apart from the pack and removed one more pain point from not only the fleet manager, but his drivers too. Also, fuel billing would come from one source and be provided with more transparency and accountability.
Side Note: I think this is a tremendous opportunity for a traditional fleet refueler too. If I was in the business, I would be looking for a partnership here.
A CPG Company (Coke, Lays, Budweiser)
Again, this is mostly an advertising opportunity – something these guys spend enormous amounts of money on. Consider this, if people have fuel delivered to them, then it reduces the number of stops at the c-store for a cola and a pack of crackers. This is a threat to one of their distribution channels.
I think consumers are more flexible in their spending habits than Brands care to admit. If you offer me two beverage brands, one of which can be delivered cold to my trunk (with a side of fuel), I will quickly choose that one over the competition.
I think it is far more likely that an on-demand fuel company will begin offering CPGs as a compliment to its own services to increase its revenue per stop.
Of note is this company that is experimenting with a “mobile convenience store” concept.
And the award for the most far fetched idea goes to…
An electric car company or charging equipment company (Telsa, ChargePoint)
Yes, you read that right. But why would they have any interest in a legacy (re: hydrocarbon) fuel delivery company? “Data is the new oil”, right (pun intended)? If you are going to build out a charging network, it might be nice to see what paths auto owners are travelling and what places they frequent (although I’m sure much of this data is already available to the OEMs). Again, like the insurance company, this could be a lead generation tool – if you are using this app you probably don’t own an electric vehicle and therefore you are a potential customer.
Think about this, if you have a customer who is paying a premium to have fuel delivered to their home or place of business, that same customer might enjoy the convenience of an in-home charging station and EV.
Also, who’s to say that these companies have to deliver liquid fuels over the long-term? One day they could re-purpose their fleet of fuel trucks to be batteries-on-wheels to charge EVs on demand (and this is already being done in China).
Conclusion
Many have been quick to dismiss on-demand fuel companies; questioning the business model and its economics. What I would say to them is don’t focus on the current value of the goods sold, but the value of the user base. Dollar Shave Club started by selling razors, but now it offers a variety of personal care products. Dropbox focused on the consumer side of the market, but has made significant inroads into the commercial end of the business. Amazon started by selling books, but look where they are now.
The point is, these companies are young and its hard to predict where they might end up one day. I look forward to seeing how it all turns out.
View the other articles in this series.