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According to a report by FICCI and KSA Technopak on fuel retailing, the size of non-fuel retailing sales in countries like United States stands at a huge 39% of gross OMC sales! Even in Europe, countries like France have a non-fuel sales contribution of a smashing 35%! Compare that with India, where non-fuel retail contributes a measly figure of only 2% (Rs.1,000 crore). Just imagine the potential!

But to their credit, Indian OMCs are not acting blind. Market reports do now suggest that some Indian OMCs are working double time to cover up. Companies like Hindustan Petroleum Company Ltd (HPCL) have already made it compulsory for petrol pump owners to have a part of the land for retailing. The above mentioned report does suggest that if Indian OMCs can exploit the segment optimally, the market for non- fuel retailing at petrol pumps is going to stand at a whopping Rs.7,500 crore by 2013, registering a minimum 50% y-o-y growth for the next five years. “Petrol pumps in foreign countries are actually developed as standalone shopping destinations in their own right. India has mid-to-long term potential for the success of these retail models, depending on how well it adapts to actual consumer requirements and psyche,” states Sanjay Chugh – National Head-Retail BD, JLLM.

Till now, among the major three fuel retailers in the country – i.e. HPCL, Bharat Petroleum Company Ltd. [BPCL] and Indian Oil Corporation [IOC] – BPCL is one that has been able to make a healthy net profit (with a whopping 25-50% margin, depending on the outlet) from non-fuel retailing mainly because of its own In&Out stores. At the same time, HPCL has recently announced that the company will provide retail space to Vishal Retail. “HPCL has a chain of around 8,000 outlets across India and according to the MoU, we will open our stores or set up warehouses at some select HPCL outlets,” says R. C. Agarwal, CMD, Vishal Retail. Some other Indian OMCs have now entered into exclusive tie-ups with many companies like Nirulas, Dominos, Café Coffee Day et al and even with various banks for their ATM usage to provide retail space at their petrol pumps.

Strangely, while OMCs are generating a lot of interest, airport retailing is still not getting the expected response from the companies, despite non-aeronautical revenues already hovering around 35% of gross airport authority’s receipts. According to the results announced (in mid-Jan 2009) for the bids of the world duty free shops at the six relatively small (if compared to global standards) international airports in India, there were no companies interested in four of these airports – Jaipur, Lucknow, Amritsar and Thiruvananthapuram. However, Coimbatore received two bids; one from a renowned Dubai based airport retailer Flemingo International Ltd. and the other from the state-owned Indian Tourism Development Corporation. At the Pune airport, Flemingo was the only bidder.

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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