Gas stations diversify aggressively as they fight to survive

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Gas stations diversify aggressively as they fight to survive

Gas stations are soon to become something very different, as charging units and hydrogen compressors are added across the land. But there’s more, as operators in the business look to diversify and make the outlets more profitable.

They are adding a wide range of goods and services, including maintenance centers, convenience stores, fast food restaurants and even coffee shops. Parcel delivery is also on the list.


Clockwise: An “On The Road” coffee shop opens at a GS Caltex gas station in Ilsan, Gyeonggi. QBoo pink smart lockers are available at a GS Caltex station. An SK Energy gas station offers the Home Pick parcel delivery service. [JEON MIN-KYU]

Such changes come as gas stations struggle under intense competition. On average, 170 of them are driven out of business annually, forcing the adoption of new strategies to survive.

Hyundai Oilbank on July 17 detailed its strategy for adding EV charging stations, while SK Energy’s gas station in Yangpyeong, Gyeonggi, has already installed an EV charging station.

GS Caltex as of May runs seven EV charging stations in Seoul, including in the Jung District, central Seoul, and Songpa, southern Seoul. S-Oil currently has six EV stations.

Hyundai Oilbank also has plans to expand the number of multi-energy stations, which will be equipped to refill hydrogen fuel-cell vehicles.

GS Caltex and SK Energy, the nation’s top two refiners, are leading in transforming gas stations.

In addition to opening parcel delivery services, the gas stations now have the QBoo smart locker service.

QBoo allows customers not only to store their personal belongings but also conduct secondhand item trades or place laundry so that laundry services can pick up the cleaning.

Hyundai Oilbank has an agreement with the Seoul city government where it has installed a parcel delivery drop off exclusively for women at five of its gas stations in Seoul.

“I usually pick up or leave parcels at the gas station on my way to filling up gas,” said 31-year-old Moon Ji-hyeon. “Since I already have a car, it’s convenient for moving heavy boxes.”

A gas station owner said while the monthly income is not much, he is running the parcel drop service because it secures regular customers.

Gas stations in the past were considered gold mines. But today they are faced with shrinking profit largely due to increasing competition. According to the Korea National Oil, in 2010 the gas station industry peaked with 13,237 units nationwide.

As of July this year, that number dropped to 11,507. Over a decade, 173 stores have closed on average every year.

The number of gas stations started increasing rapidly since the government in 1995 abolished a restriction that limited the number of stations within a certain area. By 1997, the total passed what was seen as the idea number of stations: 8,000.

When the government approved the establishment of thrifty “altteul” gas stations in 2011 in order to contain gas prices, the competition only become worse.

According to a study by the Ministry of Trade, Industry and Energy in 2015, the operating profit rate of the average retailer was around 8.3 percent between 2008 and 2013. The margin at gas stations was 2.9 percent.

Korea Oil Station Association (KOSA) estimates the average annual operating profit of a gas station at 38 million won ($32,000).

“It cost 1 billion won to set up and manage a gas station,” said 51-year-old Kim Jin-cheol, who owns a gas station in Gwangjin District, northern Seoul. “Yet our monthly income is less than 3 million won.”

He said because of the higher lease and labor costs, the profit he makes after selling gas hasn’t improved.

The tightening of government environmental regulations and the improvement of gas mileage of vehicles today are leaving gas station owners in much worse shape.

The rising sale of EV and hydrogen fuel-cell vehicles adds to the woes.

The Korea Automobile Manufacturers Association estimates last year the average annual gasoline consumption of a vehicle at 1,159 liters (306 gallons), the lowest in 12 years.

“Even if the number of gas stations is reduced to 8,000, it is still unclear if gas station profitability would improve,” said Shim Jae-myung, an official with KOSA. “That’s why gas stations, starting by those owned and run by refineries, are trying to transform to attract more customers.”

Some of the gas stations run by the refiners are also considering adapting to the so-called shared economy.

GS Caltex starting this year is working to allow the car sharing service Green Car to park their vehicles at its gas stations for customers to use.

“The gas stations are changing their portfolio appropriate for the changing times and technological advances,” said Kim Hyung-gun, Kangwon National University professor of economics. “As it is with other businesses, change is no longer a choice but a necessity.”

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