So what does the future hold for on-demand fuel delivery startup companies? Here are a few closing thoughts I have about this emerging segment.
First mover advantage
Everyone buys from Amazon, but have you ever tried Jet.com? Ever used Uber? Can you name three of its competitors? How many social networks do you use in addition to Facebook?
First mover advantage is huge in the digital economy. Once an app has been downloaded and a habit formed, it is extremely difficult to be displaced by a competitor. It would be a mistake to assume that competition in the future will look the same as the past. Today, we see determined fuel companies secure a parcel of land across the street from another gas station and build a bigger, better, brighter one and siphon off customers from its competitor. However, the barriers to entry in the digital realm are entirely different.
It is very important that a leader emerge in this market quickly and expand rapidly. So how might this happen?
Rapid Expansion
Is it possible that one of the new companies could get a large rounding of funding and rapidly expand their fleet? Sure. Growth seems to be the MO of Silicon Valley these days. Go big or go home, right?
Consolidation among startups
Looking at this list, I see companies operating in CA, FL, GA, NC, TN and TX. Combine several of these companies and you now have a decent footprint in the US market. Each company has already amassed valuable data about their customers’ locations and buying patterns…and established a habit among its users. Consolidation in the market would avoid increased competition (i.e. bidding wars).
Acquisition by a traditional fuel company
The on-demand auto fuel delivery market is a huge opportunity for existing fuel delivery companies – and it’s their game to lose. So what is the missing ingredient? The software. While there are a number of software choices for today’s fuel jobber, to my knowledge all are company-facing solutions (SmartLogix , Firestream , DM2 , etc). What the industry seems to lack is a customer-facing solution that facilitates order taking and ultimately dispatching through route optimization. It may be easier to buy this talent and intellectual property than to develop it from scratch.
Licensing of the Software
Startups could license their software to current jobbers. This makes the most sense to me, as fuel jobbers are already servicing a wide variety of industries, know the nuances of the business (rules, regulations, insurance, etc) and have invested heavily in infrastructure and assets. This would give existing fuel and oil distributors another tool to provide better service to their customers.
Franchise
One way for these new companies to scale would be to franchise (Think 1-800-Got-Junk).
Asset-light model
I hadn’t thought about this as a possible solution until I read this article about a company called Recycle Track Systems (RTS). RTS is operating as an on-demand waste pick up service. Rather than purchasing its own trucks, RTS partners with independent haulers and provides them with tablets to use. Maybe there is opportunity for these on-demand fuel companies to adopt more of an Uber-like model and contract with existing fuel delivery companies and retain the software component.
Sleeping Giant
In this scenario, I see a large company with a sizable transportation and / or retail presence making a bold defensive move that compliments their existing business. One major oil company is doing some experimentation in Europe. While I think the “Major Oil” scenario is possible in the U.S., I believe it is unlikely. Nevertheless, it’s also the scenario with the greatest potential to be truly disruptive. Remember what I said about a leader needing to emerge quickly and grow rapidly? Imagine what a well-capitalized, vertically integrated, oil company with a strong brand and existing infrastructure would be capable of. In my opinion, it’s far more likely a very large jobber makes a play here.
Conclusion
William Gibson said, “The future is already here — it’s just not evenly distributed.” The fuel industry, like many others, will experience seismic shifts in the coming decade. Regardless of how it all plays out, one thing is for sure – the next 10 years will be anything but boring.
This is the fourth piece in the series. Read the previous article Part 3 – It’s not about the Fuel or continue reading Part 5 – Are Fuel Trucks the next Food Trucks?