German discount supermarket Aldi will open a dozen automated gas stations adjacent to existing supermarkets by the end of this year, all in southern German cities. If it proves successful, the retailer plans to expand to 300 gas stations, company sources told Handelsblatt.
That expansion would see Aldi will invest around €120 million, around $140 million, in fuel retail, according to a manager who is involved in the plans and spoke with Handelsblatt.
Aldi’s plans are a direct attack on long-established fuel retailers like Aral and Shell. Fuel retail expert Christian Warning told Handelsblatt the move was “very dangerous” for current market leaders. Margins on consumer fuel retail were already perilously thin, he said, and current market players alarmed by the prospect of new competition.
Initially, Aldi will lease sites at its supermarkets to FE Trading, a subsidiary of OMV, to build and operate automatic gas stations under the Avanti brand. A subsidiary of Aldi already cooperates with OMV to sell discount gas in Austria. “Now Aldi wants to replicate that success in Germany,” the Aldi executive said.
Planning applications have already been submitted and construction is set to begin.
It’s an important move for OMV. The partly state-owned Austrian oil company currently commands just 2 percent of the German retail fuel market. A spokesperson for OMV said the concept would offer “quality fuel at a particularly inexpensive price, with a simple, fast fueling procedure.”
Experience in the Austrian market shows growing acceptance of automatic refueling stations. OMV currently operates 80 automatic stations at the stores of Aldi’s Austrian subsidiary Hofer, and a further 30 in neighboring Slovenia, with plans to expand into Hungary.
Aldi will add its own electric vehicle charging facilities to the new OMV gas stations at its German stores. Customers can already recharge e-cars in the parking lots of 50 Aldi stores, a free service offered in cooperation with energy giant Innogy.
Aldi’s move into Germany’s billion-euro fuel retail market underlines how rapidly the fuel trade is moving away from traditional business models. The rise of electric cars, falling fuel demand and new mobility concepts such as car-sharing all pose difficult questions for companies like Aral, Texaco, and Shell. The number of gas stations in Germany has fallen from a high of 46,000 in 1970 to just 14,500 today.
And crucially, Aldi is setting its sights on existing retailers’ non-fuel business. Fuel hasn’t been the big money maker for service stations for some time. Market leader Aral currently makes just 11 percent of its earnings on gas. More than 60 percent of its profits are made coffee, snacks and fresh food. According to consultants Nielsen, German gas stations together have annual non-gas revenues of more than €8.7 billion, around $10.3 billion.
Aldi’s strategy may prompt other large retailers to take a closer look at fuel retail outlets, Mr. Warning, managing director of consultants The Retail Marketeers, said. “I can easily imagine Amazon building up bricks-and-mortar food stores around gas stations.”
The German retail fuel market could be set for the kind of transformation that happened in France 20 years ago, when supermarkets moved into the business, prompting massive consolidation. Almost half of France’s 11,000 service stations now belong to supermarket chains. Retail giant Carrefour operates around 1,400 locations where customers can fill their trunks with groceries and their tanks with gas.
So far, considerable differences between the French and German markets have made it more difficult for German supermarkets to move in. But the German business now seems ripe for change.
“We will soon see a sharp split in the market,” Mr. Warning said. On the one hand, there will be a growth in “cathedral” gas stations, offering a wide range of food and drink, as well as the chance to pick up packages bought online. At the other end of the scale are discounters selling fuel only, using fully automated machines. In Denmark, 70 percent of all gas stations are now unmanned.
Germany’s existing large fuel chains are betting on a broad range of high-quality goods and services, underpinned by retail alliances.
Aral, a subsidiary of BP, is already cooperating with supermarket giant Rewe. By the end of this year, 250 Aral service stations will feature small Rewe supermarkets, branded “Rewe to go.” Competitor Shell already offers facilities to pick up Amazon packages at its stations, with some of its stations also offering Starbucks coffee.
The oil chains will need to move quickly to fend off the Aldi threat. “Anyone without clear positioning in the market could be crushed between premium sellers and the discounters,” Mr. Warning said. Small and medium-sized fuel retailers may be the hardest hit.
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