The Future of the Retail Gas Station

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Next time you find yourself on a road trip through Pennsylvania, consider a short detour to the corner of Baum Boulevard and St. Clair Street in downtown Pittsburgh. Admittedly, today there is not much to see – nothing more than a nondescript office building abutted by Walter’s Automotive Repair Shop. But back in 1913 this small parcel of land was the site of arguably the biggest revolution in American retail – the advent of the modern gas station; if you know where to look, there is even a historic marker that commemorates America’s “First Drive-In Filling Station.”

Obsessive Automobile Culture

There were, of course, automobiles on streets around the world before 1913, and they had to get gas somewhere; but the idea of a dedicated retail location where one could just pull in, fill up, get air in the tires, and maybe buy a map, was a true novelty. Unbelievably, prior to the advent of the filling station, drivers would be forced to stop at local pharmacies and other retail locations along major thoroughfares and local roads that began hawking gas as something of a side hustle.

[callout]The real question now is how other retailers – big box stores, shopping malls, outlets – will use charging stations as a hook for luring in EV drivers. That’s where all the action will be in the near term.[/callout]

Since the early 1900s the filling station evolved and went through many iterations and transformations and, in doing so, established itself as a hallmark of a global popular culture infatuated with the automobile. As the model for selling gasoline to an increasingly mobile population evolved, so did the filling station. Later known as a “service station” – today the retail category is perhaps best known for what it sells aside from gas in its ubiquitous convenience store appendages. But for the convenience store model to work, selling gas has always been seen as the bait necessary to reel in the customer. It begs the question: will local EV charging port centers have the same ability to hook customers just as gas has for over a century? And how soon before major changes to the traditional gas and convenience store model begin to take shape?

Like most things in life, the answer largely depends on whom you talk to.

EV Paradigm Shift

Even though in the United States there are just 1.3 million battery-powered electric vehicles on American roads – less than one percent of all vehicles – a clear trend towards EVs is on the horizon. The Biden administration has a goal to make half of all new vehicles sold by 2030 zero-emission. Washington State and California have announced plans to eliminate sales of new gas-powered cars by 2030 and 2035, respectively. Major manufacturers such as Volvo have already announced plans to stop producing gas and diesel vehicles within the next decade. GM has said its last gas-guzzlers will roll off of assembly lines in 2035.

With these developments underfoot, the message for gas retailers is clear: adapt or become obsolete. Boston Consulting Group would tend to agree, surmising that as many as 80 percent of America’s 150,000 or so retail gas stations could be unprofitable by 2035 – unless they get to work reimagining their business models in a big way. So conventional thinking seems to suggest that even though gas retailers’ date with Armageddon may still be a few years off, now is the time for the gas station industry to begin thinking about how it will adapt to an new era dominated by vehicles that, well, don’t need gas.

The Gas Station Reimagined

Christoph Erni, the founder and CEO of Juice Technology, a Swiss producer of electric charging stations and a market leader in mobile charging stations for electric vehicles, believes that the local neighborhood gas station will become a destination and redesigned and enlarged to become cafés or small stores with services so that e-car drivers can use the charging time on-site for personal breaks. “The bulk of EV charging will take place at home or at work, where people park their vehicles for the longest periods,” said Erni. “Gas stations on highways and traffic hubs will continue to operate and be converted into charging parks,” he adds.

According to David Yu, a Professor of Finance at New York University Shanghai and the Stern School of Business, the major opportunity for retailers currently offering charging stations is to monetize the captive audience by offering an array of services that go beyond the traditional convenience store model given that the charge time for EV vehicles is still quite a bit longer than the time needed to fill up a traditional gas vehicle. “With this longer recharge period, more services should be offered to capture the period that consumers must wait for the recharge. I would think there would be more creative options such as short entertainment or leisure activities that would fill in the duration,” said Yu.

Here’s a question: Why did Berkshire Hathaway pay $2.76 billion for its 38.6 percent stake in Pilot Travel Centers, the owner of the Pilot Flying J truck stop chain? This is a move to anticipate the future, not catch up to it. Think differently to time a service to various charging times at ex-urban charging centers: mani/pedi salon, quick massage therapy, video game center, mini-casino gaming room; arts and crafts workshop for the kids. Mall parking lots will become charging centers at scale. Sound outlandish?  Not at all. It’s an opportunity waiting for the taking. And in a nod to pre-automotive days, hitch your car to the local parking meter that also charges your car. Urban master planners, get working.

Today building new retail services around a captive customer base is only in the planning stages as a short-term opportunity as EV technology is still in its relevant infancy. Both Yu and Erni believe that in coming years, the range of vehicles will increase, thanks to larger battery capacity, and charging speeds will also become faster.

Planning Ahead

So how long will major gas retailers have before they start reconfiguring their operating models?

Some may be heartened by legendary Silicon Valley technology investor Ben Narasin’s take: “We are still a good 20 years away from a tipping point where EVs outnumber gas-powered cars,” postulates Narasin. “Remember that the average age of a car on the road today is 14 years old. It may not seem that way if you tend to drive through more affluent neighborhoods, but a good chunk of Americans drive cars that are 15 to 20 years old, so I think gas retailers have plenty of time to figure out a new business model. The real question now is how other retailers – I am talking Big Box stores, shopping malls, outlets – will use charging stations as a hook for luring in EV drivers. That’s where I think all the action will be in the near term.”

Either way, the terrain is quickly changing for gas retailers, and it will be interesting to see how quickly the sector responds to the EV revolution underfoot and uses it as an opportunity to better serve customers.

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