On the Run (OTR), part of the Peregrine Corporation, is scaling up in its home state of South Australia and extending its footprint into two more eastern states.
The family-owned business is South Australia’s leading convenience chain with 148 petrol stations and stores, spanning both metropolitan and rural locations.
Assisting in the transformation is CEO Warren Wilmot, who joined OTR after 23 years at 7-Eleven and just days after the business received an honourable mention in the 2018 NACS International Convenience Retailer of the Year Awards.
The recognition was for the latest OTR format store, opened in Fullarton, an Eastern suburb of Adelaide. The new concept reframed the atmosphere of the OTR brand as warm and inviting, encouraging the customer to engage with the store in a more leisurely, trusting way.
The focus is tailored but OTR Fullarton provides a wide variety of products and services including 40 shopping bays, barista coffee, freshly squeezed orange juice, flowers, bakery, custom hot dogs, a car wash and even a dog wash.
Freshness, in terms of fresh foods, is king and to the fore. OTR Fullarton kick-started a priority focus on freshness and local produce for OTR. All bakery products, including an extensive artisan range and dietary sensitive products, are baked offsite exclusively for the business each day. Orange juice is squeezed in store, bottle by bottle and only displayed for one day.
According to OTR, the greater Adelaide region is a powerhouse food bowl. To celebrate and support this marvellous resource, Fullarton features local South Australian produce from trusted small suppliers, as well as private labels.
South Australian customers – for whom OTR is part of a way of life – are loving the new concept. “We are very happy with Fullarton but are continuing to evolve the model and refine various aspects of it,” Wilmot reports.
The concept is now being rolled out across the OTR chain with 120 stores targeted and 105 already scheduled. Conversions include both knock down and rebuilds to the new format plus retro fits. Drive through lanes at some stores will also be part of the mix and Wilmot reports a further 10-12 new stores are also either under construction or in the pipeline.
OTR has also put a toe into neighbouring Victoria with two stores already open and more planned. Entry into New South Wales is also on the cards.
Wilmot believes the format can travel. “We definitely think it will and customers will tell us quickly,” he says. “Our Portland store in Victoria, for example, has been accepted extremely well. The competitive offerings are fairly mundane and customers have embraced our offer.” The store features a drive through for both coffee and fresh food, a key differentiator in the Australian market. “It fulfils a slightly different need,” Wilmot says. 7-Eleven, in contrast, is pursuing a much more tightly focused value coffee and fast food offer.
Building the infrastructure
While the customer enjoys the new look OTR format and offer, behind the scenes Wilmot and his team are busying themselves building the infrastructure required to cope with the planned scaled roll out and expansion.
“We are refining the roles of all the products. It’s impacting every part of the business from the food offer to PoS, the supply chain and support office,” Wilmot says. “The offer needs to be earning its keep in the market. We are building up to be able to scale and move from being very good to fantastic.”
Upgraded stores, for instance, now feature the full offer of food and coffee plus Krispy Kreme, for which OTR has the licence in South Australia.
“We are evolving each of those food elements and making it as easy to deliver as possible. These are the programs that have done very well but it’s about getting the labour content of each of these elements right. Labour is getting more and more expensive in Australia so we need to consider what parts of the offer we can take to self serve and which parts are serve over because they command more of a premium.”
The OTR app, which allows users to frictionlessly pay for fuel plus pre-order coffee, custom food and pre-packed shop orders, has wide appeal. Wilmot reports the app has 40,000 active users each month out of a possible 830,000 customers in South Australia. Eighty per cent use it to pre-order coffee, he reports. “That’s the main attraction for people and it links with a loyalty programme whereby shoppers buy four coffees and get one free.” There’s a philanthropic element to the app too, which allows customers to nominate a charity from a given selection of 24 and OTR then makes micro donations each time the app user makes a purchase. “The app is a good way to get to know the customer and find out a bit more about them, while doing some good at the same time,” Wilmot says.
OTR is not standing still, however, and already looking at the next generation app.
“We are still in the discovery phase but one thing that’s now in the market is a membership model, which we launched in a regional town. Members pay a $15 monthly subscription and get a discount price on fuel and all the free car washes that they want.”
According to Wilmot, the model is gaining good traction and providing a way to encourage people to switch from competitors; as well as giving OTR more than its fair share of fuel volume. Wilmot reports OTR plans to ‘play’ with the mechanic to determine which offers customers like and may consider bundles with coffee and electronic charging, for instance.
The membership model is especially effective for driving loyalty in a market which, like the UK, is witnessing declining fuel volumes, largely due to increasingly efficient cars. While EV has a presence in Australia, it’s limited, Wilmot says. “It’s a way-off yet – a year or two ago just 2,000 EVs were sold out of 1m new vehicles on the road – and we are not yet following the trends of the UK, US or Scandinavia. The big issue for retailers is that cars are more efficient so overall fuel volume, although there are more cars on the road, is tending to decline.”
EV charging is popping up in new locations, however. These range from shopping centre car parks to hotels in regional towns, as well as forecourts. However,for the latter, Wilmot suspects it will be big transit sites where EV charging will really fulfil a role although not replace the fossil fuel element.
Wilmot regards EG Group’s entry into the Australian market with the purchase of Woolworths forecourt locations as an interesting move but suggests it’s still too early to assess the likely impact. Wilmot believes the facilities offer on a good tranche of the estate is unmodifiable. “It will be very different to how they pull good real estate uses together in the UK and with a merchandise offer to attract customers,” he says.
“There will be some good stores that they can play with but about half of the estate are sites with little kiosks that have been shoved on the corner of a supermarket car park to redeem the supermarket docket, and have virtually no modification available to them.”
In the meantime, there’s been no noticeable change in retail pricing of fuel as a result of the market entry. “I doubt anyone in Australia would notice any change in the market. The market seems to have pretty well tried to maintain margin on fuel,” he says.
In fact, OTR probably comes closest to the EG Group’s UK format that’s successfully tried and tested in other markets of having a mix of brands on the one site, including its own.
In addition to Krispy Kreme and 54 Subway outlets, OTR operates with five QSR brands:
- The bakery brand, Brumby’s
- Mexican brand – Guzman Y Gomez
- Hungry Jack’s, a version of Burger King
- Oporto, Peri Peri style chicken
According to Wilmot, it’s about making the most of the real estate and providing customers with a breadth of options on the site, plus it insures against eventual trends of falling sales for cigarettes and fuel.
“Those are the elements we have added to the business to make life easier for customers – a broader range of options for people to use the site.,” Wilmot says. Drive throughs provide another incentive to visit, especially given drivers can purchase food, coffee and shop items in this channel, without leaving their cars.
Like other leading retail executives, Wilmot wins inspiration by traveling to other top convenience markets and participates in NACS/Insight events and study tours.
He’s recently back from the UK and a re-visit to retail locations in London, which he had visited 15 months previously. He reports being staggered at the explosion in plant-based NPD and vegan offerings. “It’s gone from 10% to almost 30%. I’m amazed at how quickly it’s moved,” he says.
Australia tends to be three to four years behind the trends in UK but it’s a big takeaway and shows that concerns about the environment etc have taken on life of its own, he says.
“There’s been a move to healthy and declines in confectionery and sugary drinks in Australia, but nobody has grabbed the vegan or healthy for you, by the scruff of neck and done a fantastic job,” he continues. But the seeds have been planted at OTR, it seems. Hungry Jack’s, for instance, now offers the Rebel whopper, a “sensational” plant-based burger. Pret, meanwhile, shows that it’s possible to evolve since now 20-30% of its range seems to be salads or non-bread sandwiches, Wilmot says.
As for new technologies, OTR is on the case too. Wilmot reports digital menu boards are increasingly being used plus digital TVs to communicate different messages at different times of the day. Vehicle number plate recognition technology is also being deployed to understand when member customers drive onto a site.
“We are putting more data into the system so that we get to know more about customers and understand how to activate them,” Wilmot says. “We’ve not seen anyone tie it all together yet. People have tried various things but no-one is saying they’ve cracked it.”
In the interim, OTR is firmly focused on the next nine months and the rebuilding phase of its infrastructure so that it may scale to much bigger heights. “It’s getting software systems sorted, internal departments, data analytics plus tackling new areas and trying to be ready for doubling, tripling or quadrupling the size of the business, which are owners are keen to do. I trust we can build that infrastructure at the right pace for expansion that is envisioned,” Wilmot says.
Extracted from Global Convenience Store Focus