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Retail is detail

Secrets of success of retail stations

Bogdan Volostrigov

on 23 October 2012

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Transcript of Retail is detail

Retail site:
Secrets of Success Bogdan Volostrigov Adjunct Professor
MGIMO University There are good ones... ...and bad ones You can feel the difference But you can calculate it as well Petroleum retail has a long history ...and it has taught us a lot St. Louis, MO (1905) - 1st dedicated gas station Why did it fail? Thus, we need a prediction tool Success? Failure? Depending on many factors,
a site can be a success
or a failure And since you can not
move the site easily,
mistakes will be costly Bad sites destroy value Primary formula of Petroleum Retail Profit Sales = Margin × = Traffic × Turn-in % × Avg. fill The goal is to maximize each component Sales Location Plot Traffic Accessibility Competition The best site in the middle of nowhere will NOT sell A clear #1 among factors Busier traffic means that at average turn-in rate the sales will be higher Best sales - within cities, worst - rural areas Sources of traffic data Special services Manual count 15-min counts extrapolated with adjustments Click counter -- best friend of a Marketing expert! 1. Access from two sides of the road as well as access from a secondary road is beneficial 2. Slower traffic is beneficial
(but not traffic jams! 3. There must be no difficulty
in changing lanes 4. “Far corner” is beneficial 5. Nothing should obstruct
entrance and exit Bad accessibility example 1 parked cars Bad accessibility example 2 traffic jam Visibility Perfect 5. Good 4. Average 3. Bad 2. Awful 1. Better visibility means increased time for the driver to make a decision (or to actually locate the site!) Really bad visibility. The object is impossible to be seen (behind trees, buildings, billboards) unless approached directly. Below average visibility. Visibility is worse than that of an average site, located in the same district. The driver will have insufficient time to spot the site and approach it. Average visibility. The driver will have enough time to make a decision. Above average visibility. It is visible better than the competition. The plot can be noticed from the distance. Perfect visibility. Obvious advantage over competition. Great visibility example 1 Great visibility example 2 Bad visibility example 2 Strong competition can kill an otherwise fine site Relative strength One competitor which is way stronger can doom a site But first let's learn what drives the success Exclusive 0. no new competition can possibly be built nearby one or two sites relatively
far from a given site Low 1. Average 2. Strong 3. "Gasoline Alley":
Several sites grouped closely Perfect competition To France From France Berchem, Luxembourg
Two biggest retail sites in Europe 110 mlpa 200 mlpa Area Layout Communications The bigger - the better 1. More dispensers and extra facilities 2. Allows to use standard designs w/o adjustments Car wash, larger shop, cafe... Square shape > Exotic shape how are the dispensers located? 1. Startergate Grid, water, plus hidden obstacles 2. Domino 3. Consecutive Brand Vs. Equal area, different shape Sales Traffic × Turn-in % × Avg. fill Margin Works, if you are a retailer
(as in Europe) If people like you, you get
more customers 1. Better brand attracts bigger cars 2. If people trust you, they are more
likely to get full tank Premium brand allows
to charge higher price Brand segmentation TNK-BP runs two brands that address different consumer groups Customers "Discriminating
customer" "Price-sensitive" "Frequent stopper" "Offer" Better service, higher prices Predictable service,
competitive prices Services Car wash, premium shop, ATM
cafe, pump attendants,
"pay after"windshield cleaning
BP Ultimate fuel Smaller shop, tire pumping, TNK Pulsar gasoline Margin 15-18 cents / liter 10-12 cents / liter Implications: Best locations

Largest plots

Only biggest cities or federal highways Implications: Flexible locations

Flexible design
(smaller versions available)

All over Russia / Ukraine So, what about predictions? BP has developed a methodology to assess the site's actual and potential performance RER -- "Real Estate Rating" (0 to 4 with a step of 0.5) Assessment components Form to be filled by an expert on site
Traffic data to be counted for 15 min
Model that extrapolates traffic count
Model that calculates a rating
Pictures, taken on site
SWOT analysis by an expert And now, YOU are the expert! Primary goal: Get a feel of being a real Marketing expert Secondary goal: Learn how to use RER methodology Procedure: Split into teams of 4-5 members.
Choose a retail site (ensure that it is different for each team!)
Fill an RER form, including traffic data, take photos
Evade being caught by the police (optional)
Try to assign a rating to a site based on the gutfeel
Prepare a 15 min presentation with recommendations TNK-BP dug out literal skeletons on the plot during the construction of a St. Petersburg site. Archaeologists worked on the site for a year and construction was delayed. It’s great to have a car in your team, you are less suspicious
Having two click counters will help greatly: One team member counts all passing cars, another – cars that drive into the site
Fill an RER form, including traffic data, take photos
Google Maps and Yandex Panoramas can greatly enhance your presentation Tips You can try to ask an attendant about the average fill.
You can also grab some receipts from a trash bin! (a legitimate method)
Evade being caught by the police (optional)
Try to assign a rating to a site based on the gutfeel
Prepare a 15 min presentation with recommendations
While in the class, I will fill the real model based on your data and we’ll see how close you were in your estimate Tips Thank you for being an awesome audience!
I hope you enjoyed this little experiment :) Next time: your exciting stories of teamwork
Full transcript