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Shell-7-Eleven split: Why breaking up was the right move by Shell

Just yesterday, Shell unveiled plans to end its 11-year partnership with convenience store chain 7-Eleven in a bid to take back its petrol stations in Singapore.  A Shell spokesperson told Marketing the stores would be renamed as Shell Select and has also paired up with the likes of McDonald’s to offer “options that are aligned to its customer value propositions”.

Currently, the revamp is already underway and several industry players Marketing spoke to applauded the move by the petroleum giant, saying that this was a means for the station to “take back control” of the customer journey and create a more seamless end-to-end experience.

According to Andrew Crombie, brand consultant and former CEO at Fitch, Southeast and North Asia, the move will create a more seamless end-to-end experience to meet the demanding expectations of the modern mobile customer. This gives them a chance to break the predictable fuel/convenience model offered by most fuel brands.

Crombie added that Shell has an incredible asset in its distribution network, and a huge opportunity to gain first-mover advantage in reshaping the overall mobility and convenience offer against other fuel brands.

“It can’t fully realise this opportunity if it has to negotiate or coordinate each initiative with a third party operator,” Crombie said. He added that with the split, Shell will be in control of the convenience store and the products it offers. It will also have more opportunities to test new concepts and vary its offers geographically and create a more integrated overall concept for each site.

“A lot has changed since the relationship has started in 2006. Customers are more aware and more connected and their needs are different. And mobility is in the midst of a major change. To take best advantage of this change, Shell needs to be able to control every element of its overall offer and this move to part ways with 7-Eleven in Singapore makes this more achievable,” Crombie explained.

From a branding perspective, Crombie agreed that without doubt, 7-Eleven drew the short end of the stick as it loses a ready nationwide-distribution network with convenient parking, and with a regular and reliable clientele. He added:

7-11 loses significant brand presence as its signage numbers are reduced and the strong association of brand credibility and modernity that comes from Shell.

Agreeing with Crombie was Jane Perry, managing director of Geometry Global Singapore, who deemed the move strategic for Shell to better differentiate its business from competitors. The partnership with 7-Eleven, she said, made offering a seamless customer experience for its consumers challenging.

“This is because both Shell and 7-Eleven have strong brand equities – hence the seamlessness of the customer experience might be compromised in the process,” Perry said. She added:

It is also challenging to marry the brand equities of two retail heavyweight brands.

“The move will give Shell 57 more touch-points to engage and connect with consumers. This is something which it was unable to do before as it had no control of customers entering another retail environment,” Perry said.

Perry said the bold separation will give an opportunity for Shell to innovate throughout the entire fuel station experience and offer something different for consumers.

“Customer engagement through fuel stations is something which is still lagging behind in Singapore, when compared to the rest of the world. It’s an experience which at times still feels quite transactional and disjointed,” Perry added.

Simon Bell, managing director of FITCH said currently the partnerships in place between convenience stores and fuel stations are typical with nothing unique or differentiated. Bell added the move was smart of Shell to invest in its own brand and extend the customer experience from forecourt to convenience store, rather than to share its limelight and real estate with 7-Eleven.

“In branding, having an own-able experience is the holy grail. Done right, retail wields this power. To me, Shell is focusing on Shell (or finding new partners such as McDonald’s) that will assist it to achieve this. The point of difference will come in how the new relationship (whether convenience store, fast food or something else) can complement and enhance the Shell forecourt and station experience,” he added.

 

 

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