There are quite a number of things that have militated together to bugger the traditional servo:
1. The rise of discount auto accessory chains like Supacheap, plus tyre and battery chains, effectively dried up this part of their business. A lot of new car owners also thought they had to go to the selling dealer for service, which didn't help either. Lately we have car wash cafes walking off with their carwash business.
2. The high value of the real estate has meant that the owners of the servo site, usually an oil company, could not get an economic return for all the workshop space at rents that the mechanics could afford to pay. So they closed the workshops, redeveloped to get more rent from a bigger retail area or sold it for home units.
3. New environmental regulations have pushed up the costs of building a servo and the response has been to put more pumps onto less sites. We have leak detectors and secondary containment as well as vapour recovery at the pump coming soon. The costs of remediating an underground fuel leak can sometimes exceed the value of the land. In the old days, a servo could get by on 100,000 litres a month. Now we have big sites doing well over ten times that. When tough USA environment laws came in about 20 years ago, one third of the servos there closed.
4. 24 hour trading, to maximise the return on the site, has pushed up labour costs. Now there aren't enough staff to fill a gas bottle and you have to settle for a swap-over one. Security and electricity costs have also gone up. So have head office overheads at the chains.
5. The two supermarket giants now control about half of the Australian fuel market. They are able to offer huge fuel discounts by overcharging for their groceries and screwing down prices with their suppliers. That is killing a lot the independent servos and, if they wanted, the supermarket majors could put on a price war that would send hundreds of these independents broke. A lot of independents carry an oil company brand, but they are still independent.
6. Servos and convenience stores pay over-the-top prices for their shop goods because of failings in the supply chain and discriminatory pricing by the major suppliers. As a result 15 per cent of their shop stock is now bought directly from the supermarkets. In the bush, it is closer to 25 per cent.
6. Twenty-five years ago there were around 13,000 servos in Australia. Now we have about 5,000 or so. It's a very cut throat business and definitely not for the timid of heart.
Twenty six years ago, I started publishing a little national magazine for service station owners. It was called "Service Station". Then it became "Service Station & Convenience Store News" and, later just "Convenience Store News." These days it is called "Convenience & Impulse Retailing". That's how times have changed. Believe it or not, the public has got what it asked for.
