Ampol has now committed to joining Shell and Telstra in attempting to carve out a significant share of the electricity retailing market. All three believe that the incumbent major retailers – AGL, Origin and EnergyAustralia – are not maximising the advantages of their databases, artificial intelligence and other developments in the technology society.
The three giants of the industry will have a different view and have been given a clear, long-term warning. They have time to adapt to meet the challengers. But competing against the likes of Ampol, Shell and Telstra is very different to competing against smaller operators.
This will be a war between enormous companies the like of which we have not seen before. It will be based on price, data and marketing because the product is a standard commodity. There will be casualties.
One area of potential vulnerability is the networks of petrol-selling service stations, which are going to require fundamental change.
We are seeing exactly the same data-driven competition starting to happen in bank lending to smaller enterprises that currently is dominated by real estate security.
In the future, a much greater proportion of bank lending will be via data and business performance, as illustrated by NAB’s thrust into the arena. Small and medium-sized enterprise loans that are based entirely on the data of the enterprise and available on a continuous basis are the way of the future.
Ampol is entering the power retailing business because it sees that within a decade or so a large proportion of Australia’s vehicle fleet will be driven by electricity rather than petrol, so it must join the fuel switchover or it will become a redundant force in its base business. And the network of service stations must be able to charge a vehicle inside 10 minutes, or people not using home charging will charge their cars at supermarkets and stores such as Bunnings where they spend longer periods doing the shopping, allowing the car to be charged.
Selling electricity for cars means you must also enter the wider power market, particularly as many vehicles will be recharged in the home. Being successful in that electricity market will require the development of a range of new skills.
Currently, Ampol brings oil in from the US and other areas to its Brisbane refinery. To maximise profits, it trades on the oil market. Buying electricity takes those skills to a new level because the price of the product can be a minus where Ampol will be paid to take the electricity to very high prices when there is a shortage. That requires very sophisticated and watertight hedging contracts.
Managing the customer data becomes just as important as the product.
In many ways, because the changes are so profound it is easier to tackle electricity retailing with a blank sheet of paper, harnessing your existing skills and adding new ones.
Ampol has a strong commercial network with a significant share of corporate fleets. That will become its base data to enter the power business. Sadly, it has little data on people who buy Ampol fuel at the petrol station, so it can’t engage in database marketing over the wider areas of its customers without developing new techniques. Shell is in an even more difficult position because it has sold its oil operation in Australia and, although its brand is used to market petrol and other products, the actual business is not owned by Shell.
The global company decided to buy a small electricity retailer but chose one with a customer base with a big environmental content, which created am “anti- Shell” backlash.
Nevertheless, Shell has acquired the base electricity market skills from which it must develop a database marketing program. BP must be looking hard at whether it follows Ampol and Shell.
Telstra is in a totally different situation because it has a wide telecommunications database but it will need to develop cross-marketing skills.
Information on electricity consumption is an incredibly valuable tool for determining products and services that customers are likely to use. Data can only be used this way when the customer agrees to wave privacy constraints.
But there will be big incentives for customers who do allow their data on electricity consumption to be used to promote products to them.
This is the world of data marketing. The major electricity retailers already have this information but have legacy structures and that will require a substantial restructuring if they are to compete with the newcomers in this game.
In many ways, given the pace of technology change it is easier to tackle the market via a blank sheet of paper.
Extracted in full from: https://www.theaustralian.com.au/business/ampol-set-to-join-shell-telstra-in-bid-to-grab-big-piece-of-australian-electricity-retail-market/news-story/459639cdc714