EV Charging Stations Will Challenge Retailer’s Brand Identities
Starbucks and Volvo; Tim Hortons and TurnOnGreen. Two examples of how retailers are supporting climate initiatives and taking advantage of the increase in electric vehicles (EVs). Or is it something more capitalistic like brand alignment? Does the nature of installing EV charging stations have more to do with attracting customers to a specific location than it does about altruism, benevolence, and a warming climate? Hopefully, it’s both but either way you look at it, there is a powerful trend underway that will alter the models for location analytics and trade areas.
Gas Stations: Will They Transform Into EV Stations?
A typical trade area for a fuel retailer in an urban area is not very large; perhaps a few city blocks and in some areas, not even that large. In rural areas, the size can vary widely. What’s the attraction for a standard electric vehicle to get a charge at a fuel station versus a Starbucks or a grocery chain? The attraction to any retailer can be well-modeled by the Huff model (postulated by the late David Huff in 1963), which considers “attractiveness” factors as well as distance decay (please don’t call the Huff model a “gravity” model; Dr. Huff would have severely chastised you).
So, if an EV owner is journeying to the grocery store or the local Home Depot, and it takes an average of 30 minutes for even a partial charge to the car, would you find that stopping at a fuel retailer is inconvenient? There must be some additional reason to make a stop at the fuel retailer for an EV charge, and that’s the conversation happening now at many fuel and convenience store chains. What’s the model that will continue to attract vehicles when the internal combustion engine (ICE) goes the way of the horse and buggy?
The New Trade Area Model – A Focus on “Dwell Time”
Currently, EV charging stations are popping up at hotels, malls, and restaurants. This is already transforming trade areas for both fuel retailers and the places where consumers stop for longer periods of time than they would to gas up their ICE cars. Convenience becomes both a factor of distance and availability to charge. Charging stations become another reason to frequent the nearest Costco in addition to their abundance of merchandise at enticing prices.
The attractiveness factor most critical now hinges on “dwell time” as well as any other criteria. For retailers like Costco, consumers are spending 30-40 minutes inside their stores. The dwell time is enough for a nice jolt to your EV while buying your six-pack of pianos (buying in bulk has its advantages). At a hotel, an overnight stay will adequately provide time for a full charge. Stopping for dinner at the Olive Garden? Perhaps one hour will be enough to top up the EV. These are substantial benefits to consumers and will boost brand affinity.
Beating a Path to Better Branding
Volvo and Starbucks are partnering to offer EV charging stations. According to CNBC:
Volvo will install as many as 60 Volvo-branded, ChargePoint DC fast chargers at up to 15 Starbucks locations along a 1,350-mile route from the Denver area to the coffee company’s Seattle headquarters.
The objective is to position the stations approximately 100 miles apart. The advantage for Volvo is extending their brand using a standard charging supplier and promoting their EV cars while affiliating the Volvo brand with another, a high-end consumer product like Starbucks. The advantage for Starbucks is leveraging Volvo’s investment in EVs and providing another reason to drive your EV to recharge, both electro-mechanically for your car and physically with a healthy dose of caffeine.
Fuel Retailers Will Fight Back
Convenience and fuel retailers know they will be impacted by alternative locations for EV charging, and they will fight to maintain loyal customers who frequented their establishments during their ICE- vehicle-driving days and are now transitioning to electric. How they will do it is a matter of volume as well as convenience. If the market for EVs is growing with some estimates exceeding 50% per year, then the demand for charging stations will likewise grow as well. But the space allocated for charging stations at each of the above options may be limited. This is not lost on Shell, the world’s largest energy supplier. Shell currently operates 90,000 charging points and anticipates installing 500,000 charging points by 2025.
We’re committed to providing customers with the best and most convenient EV experience available, enabling them to charge where, when and how they want, according to Shell.
In addition, Shell is changing its convenience store format to accommodate EVs and to align with partners such as Costa Coffee and Little Waitrose & Partners Supermarket in their pilot store in Fulham, London, United Kingdom. Wi-Fi will be free, and accommodations made for more seating. Shell is also offering “off-site,” Shell-branded EV chargers that are not tied to a fuel retailing station.
The Speed and Complexity of Change
This brings us to how location models will change. The Huff retail model is particularly well suited to determine attractiveness but must also consider shifts in demographics, especially those brought on by the pandemic where workers are driving less frequently to their place of business. The work from home (WFM) cohort may indeed frequent coffee shops, whether Starbucks or Shell. The psychographic segment of upper-income individuals that can now afford EVs will also shift as prices drop with increases in vehicle options, such as size, battery life, and cost of ownership. These are some of the basic criteria for developing a new trade area model.
However, as the demand for gasoline begins to change, fuel retailers will have to optimize their networks to accommodate the balance of ICE fueling vs. EV charging. Here, there is substantial complexity in developing new trade area models during a period of rapid EV adoption and the desire to remodel physical locations quickly or open new ones. Company-owned locations or franchisees may be hindered by zoning, local tax considerations, and the ability to acquire material in the middle of a supply chain crisis.
Advanced, data-driven analytics to speed up decision-making will be required to establish updated network planning and optimization models, evaluate new site sales potential, realign trade areas, and understand a mixed pricing strategy. As a result, retailers will see a need for innovative incentives and tactics using dwell time vs sales correlation to better predict sales. These highly volatile conditions will necessitate more rapid decision-making that matches this transition.
This marks a distinct change from when fuel retailers were operating in a saturated market. If retailers need to make decisions with increasing frequency, many applications regarding pricing, site selection, and trade area analysis will need to leverage the tools of artificial intelligence (AI). And finally, there will be new entrants into the EV charging point market that may offer entirely different services that we are not yet seeing in the market today.
The good news is…
Overall, the model for defining convenience as well as other trade areas where consumers purchase goods will likely challenge brands and the ability to predict sales for the foreseeable future. The good news is that today’s more current, more advanced datasets are available to provide market insight, from high-definition, road traffic analytics, to footfall data, audience segmentation, and consumer expenditures. Each is valuable input to AI models.
Why Korem
At Korem, we’ve helped manage the disruptive changes in fuel retailing as well as kept abreast of the innovations in location technology that keep our clients ahead of the competition. If you like this article, you can also read How Geospatial Technology Can Help Select Optimal Locations for Electric Vehicle Charging Stations. Contact us today for a Location Analytics Pilot to jump-start your EV projects and utilize advanced models to help define new EV trade areas.
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