Expansion plan upsets fuel retailers

Expansion plan upsets fuel retailers
27/11/2018 , by , in ALLIED

Questioning the logic behind the decision to double the retail network, existing dealers said the trade was already under stress.

A dealer with an outlet in a locality in Chennai, where real estate prices had more than doubled in the last few years, said it did not make business sense for existing dealers themselves. Instead of selling fuel, monetising the prime real estate better, would be a wiser option, he said.

In fact, the government is now talking of a shift to cleaner fuels such as CNG and electric vehicles. “If that is going to be the future, how can they justify this expansion,” asked a dealer in Cuddalore.

However, the exit policy is very tough. “Oil companies bring various schemes from time to time, including tie ups with sweet outlets or ATMs in the additional space in ROs. But that has not taken off as expected,” a Chennai dealer pointed out.

A second-generation dealer said newcomers would have to invest around ₹1 crore if they have to impress customers. “First impression matters. And they have to be at the outlet from early morning to late night to earn a profit, which would easily take 5-10 years. And since it is a buyer’s market, you need to give something to the customer, especially those buying in bulk, discounts or credit. And at least 20% of such credit is not paid back,” he explained.

A senior official in the industry, however, said that competition would make the dealers work better. “Usually, dealers who work at the outlets get better gains. We call for outlets in places where there is the requirement. But we don’t get as many responses as required,” he explained.

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