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Dear PEI Member: The petroleum
equipment industry is facing a number of potential disruptions in the next
few years. Electric vehicles, artificial intelligence, mobile fueling and
other forces may transform the way manufacturers, distributors and fuel
marketers do business.
But the
biggest disruptor of all might be Amazon Business, the two-year-old B2B
marketplace that allows distributors and other businesses to list and sell
products on the world’s largest online platform. Amazon Business lets buyers
compare prices and take advantage of attractive features including same-day
shipping on some items and free two-day shipping on more than 100 million
others. Buyers also receive 90-day terms or 5 percent back on their
purchases, along with customized reports to help them better manage their
purchasing.
Amazon
Business already has disrupted historical supply chain relationships in
electronics, HVAC and other distribution-based industries.
So far,
however, Amazon Business is little more than a blip in our industry. Few
petroleum equipment distributors sell through Amazon Business, and Amazon
isn’t yet a distributor for components used to store, meter and dispense
fuel. But how long will this last? Could Amazon Business disrupt the
historical relationship between petroleum equipment manufacturers,
distributors and customers?
PEI
Editor-in-Chief Kristen Wright and I recently participated in a two-day
forum on Amazon Business sponsored by Modern Distribution Management (MDM).
Led by Tom Gale, CEO of MDM, and Ian Heller, president and COO, presenters
explored the potential impact of Amazon Business on wholesale distribution.
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Amazon Business
Octane and Ethanol
Eastern States Push Renewable Fuels
Respond to this Newsletter
by
e-mail to the editor, Rick Long at rlong@pei.org
or
join the discussion in the
Petroleum Equipment Forum
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Here are
my top six takeaways:
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Amazon isn’t stupid. Distribution is a
potential goldmine for Amazon. In only two years, Amazon Business has
reached $10 billion in annualized sales. These sales also bring huge
profit margins because the third-party sellers bear most of the costs of
sale—from inventory to capital expenses. Amazon’s primary
responsibility—the digital infrastructure that runs the show—is leveraged
from the company’s consumer site. Moreover, scaling a business through
technology is one of Amazon’s greatest strengths, so capturing a greater
share of the $5.6 trillion wholesale distribution economy is within its
reach.
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Our
industry isn’t immune. If you think the
complexity of fuel handling equipment protects you from Amazon Business,
think again. In other industries, Amazon Business provides a marketplace
for technical equipment and then hires local contractors for installation
and service. Amazon Business may not duplicate the way you sell, but its
proven technology and customer focus offer real value.
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Amazon can’t be trusted. There are lots of
reasons a distributor might decide to sell through Amazon Business,
including: access
to more customers; the ability to leverage Amazon’s shipping capabilities;
and the opportunity to tap into the world’s most sophisticated e-commerce
system without a major capital investment.
However, going all in with Amazon Business is
not without risk. Remember, Amazon Business isn’t a passive technology
company. It also is a formidable competitor. Amazon is working to become a
super distributor on the same platform it has created for other
distributors’ products.
Distributors who commit to Amazon Business are
handing their digital futures and sensitive customer data to a potentially
fierce competitor.
Can you trust Amazon? As MDM’s Ian Heller said
at the forum, “Amazon absolutely can be trusted to do whatever is in their
best interest.” It’s called capitalism. Amazon Business might not want to
put other distributors out of business, but it doesn’t particularly care
whether those distributors survive.
- Distributors have
options. Even if Amazon Business enters our industry, traditional
petroleum equipment distributors who don’t want to join the platform can
prosper through other business strategies. Speakers at the MDM forum
mentioned three options.
One, respond to the challenge with continuous
improvements that will make you a better distributor. Competition often is
the spur that makes strong businesses even stronger.
Two, become a different kind of distributor
through new lines, markets or services. The
2018 PEI State of the Industry
survey showed many PEI members already are taking this route. Traditional
retail fueling work is declining as a percentage of total sales, with car
washes, alternative fuels and commercial business climbing.
Three, transform your business. One speaker at
the forum speculated that distributors in some industries will abandon or
scale back their inventories and become super-contractors that mostly serve
Amazon Business customers. That’s probably an extreme idea, but reinventing
your business is not. If old lines of business become less profitable, find
new ones.
- The disruptor could
be disrupted. On Sept. 13, the Federal Trade Commission (FTC) initiated
hearings into whether Amazon is violating federal antitrust laws. If the FTC
breaks up or heavily regulates Amazon, the company might decide to become a
friendlier competitor or exit wholesale distribution altogether.
- An anti-Amazon
platform could emerge. Some experts suggested the threat of Amazon
Business might prompt distributors to create their own cross-industry
digital marketplace. To succeed, such a platform would require a critical
mass of participants, innovative technology, reliable freight partners and
distributors willing to work together. No small task, to be sure. But if it
could be done, the new platform would have several advantages over Amazon
Business:
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Lower costs and pricing.
A distributor-led marketplace that needed only to cover its costs should be
able to undercut Amazon Business’ prices substantially.
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Control of customer data. Participants in a distributor-led B2B platform could
keep and protect all their information rather than being forced to hand it
to a competitor.
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Installation and service business. The anti-Amazon platform could be designed to help
equipment providers bundle service revenue in with distribution.
The future
of Amazon Business in petroleum equipment distribution is uncertain. But
we’ll be watching. You should too.
U.S. HOUSE CONSIDERS OCTANE, ETHANOL STANDARDS
The U.S. House Energy and Commerce Subcommittee is considering a bill
that would replace today’s Renewable Fuel Standard (RFS) with a federal
octane requirement and make other notable changes to the Clean Air Act.
Beginning in 2023, the bill would:
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Require vehicle manufacturers to build and warrant light-duty
vehicles for fuel blends with up to 20 percent ethanol.
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Require vehicle manufacturers to build and warrant light-duty
vehicles for gasoline with a research octane number (RON) of 95 or higher.
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Require vehicle manufacturers to incorporate technically and
economically feasible devices or features that would prevent misfueling of
the new vehicles.
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Require fuel marketers to incorporate technically and economically
feasible devices or elements to make their gasoline dispensing equipment
compatible with 95 RON fuel.
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Shield vehicle manufactures and fuel marketers that are in compliance
with the compatibility and misfueling requirements from liability for
damages resulting from unlawful misfueling.
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Direct the FTC to prescribe in-vehicle and point-of-sale warnings to
protect consumers from misfueling.
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Make year-round E15 sales possible by extending the summertime Reid
vapor pressure (RVP) waiver to blends containing more than 10 percent
ethanol.
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Require newly installed gasoline dispensing equipment to be
compatible with fuel blends of up to 20 percent ethanol.
The bill,
known as the 21st Century Transportation Fuels Act, is sponsored by
subcommittee chairman John Shimkus (R-IL) and Rep. Bill Flores (R-TX).
EASTERN
ALLIANCE TO PUSH RENEWABLE FUELS
Nine northeastern and mid-Atlantic states and the
District of Columbia announced plans to develop a program that would limit
allowable pollution from transportation fuel and charge fees to entities
that exceed the limits. The states then would invest the fees in clean
transportation technologies including zero-emission vehicles and mass
transit. The nine states participating with the District of Columbia are
Connecticut, Delaware, Maryland, Massachusetts, New Jersey, Pennsylvania,
Rhode Island, Vermont and Virginia.
FROM
THE STATES
California. The California Department of Food and
Agriculture's Division of Measurement
Standards is considering a proposal to allow but not require automatic
temperature compensation (ATC) devices on gasoline dispensers in the state.
The California Fuels & Convenience Alliance (CFCA) opposes the measure, in
part because of a fear that passage could lead to mandatory ATC.
Pennsylvania. The Pennsylvania Department of Environmental Protection
(DEP) has traced the source of petroleum contamination in the Harrison sewer
system to an abandoned underground storage tank under a convenience store
that once had been a gas station. After determining the extent of the
contamination, DEP will begin remediation procedures and initiate closure or
removal of the tank.
DEATHS
Joseph “Joe” Radermacher, age 66, died Dec. 5, 2018. An active PEI
member, Radermacher was the longtime president and CEO of Pump and Meter
Service in Hopkins, Minnesota. In January 2018, he stepped down as president
of the company but retained the CEO role. Survivors include Collen, his wife
of 44 years; children, Amy, Kelly, Eric and Kurt; and siblings, Cheri, Tom,
Connie, Carol and Cathy.
MEMBER
NEWS
The Jones Covey Group hired Mark Shirley
as program manager for testing. Shirley has 18 years of experience in the
petroleum industry.
Matrix Capital Markets Group Inc. advised Giant Eagle in its
acquisition of Ricker Oil Co., Inc., a wholesale fuels distributor and owner
of 56 convenience stores in central Indiana.
Seneca Companies named Chris Biellier vice president of
environmental services and strategic partnerships. Biellier has been at
Seneca for more than 14 years, serving most recently as vice president of
the company’s environmental services and waste solutions divisions.
Vapor Systems Technologies retained Caliber Professional Sales
Services as its representative for Arkansas, Louisiana, New Mexico,
Oklahoma and Texas.
MEMBERSHIP APPLICATIONS
California service company. AW Associates Inc.,
2045 California Ave., Suite 101, Corona, CA 92878, applied for service and
construction division membership. Kathy Wilkerson is president of the firm,
which was established in 2009. AW Associates, Inc. is a fuel system service,
maintenance, repair and compliance company. Sponsored for PEI membership by
Glen Corkill, Source North America, Dania Beach, Florida.
South
Carolina construction company. Quality Quick, 340
Shell Brooke Way, Lexington, SC 29073, applied for service and construction
division membership. Kenny Patel is manager of the firm, which was
established in 2016. Quality Quick is a service company for the petroleum
equipment industry. Sponsored for PEI membership by William Rodriguez,
Integrated Petroleum Equipment Co., Plainview, New York. |
