Forecourt
March/April 2002
Stop thief!
Are drive-offs costing you too much at your service
station? Pre-payment might be an option. As with everything, it depends.
The information and different views presented here should help you
make your decision.
"I introduced pre-pay for the 'susceptible' hours nine years ago.
Initially, there was a customer backlash - people felt they were being
accused of being thieves. Now, these same people are in the habit of
coming into the store, doing some shopping, ordering their fuel, paying
for all purchases, filling the car and going about their business. It
is easier, unless they need a refund when they have to come back in
to collect. There has been no adverse long-term impact of fuel volumes.
We still get 'shady looking characters' trying to get us to start the
pump, and when we don't, they just go away." Robert Martinovich,
Caltex franchisee, Western Australia.
24-hour sites in metropolitan areas are the most vulnerable,
mainly during the hours of darkness. Offenders favour the far lanes
of large busy sites near main roads. Incidences of drive-off and the
related problem of "inability" to pay increase in number
when petrol prices rise to around the $1 per litre mark, and around
Christmas time when debit cards are low.
The cost of the problem at individual service stations
varies from negligible to staggering - over $1,000 in a month has
been reported. It is difficult to estimate the cost to the total industry
due to the lack of data. At the service stations that participated
in the pre-pay trials in South Australia, average loss in July 2001
was just between $200 and $300 per month.
If we use the range of $200-$300 per month and apply
it to the number of metropolitan stations - over 3,300 - the cost
to the industry could be somewhere between $8m and $12m per annum
nationwide.
To place this in perspective - assuming a retail price
of 82.5 cpl, a margin of 2.5 cpl, and an average fill volume of 40
litres, a drive-off is a loss of $32. To recover this loss through
profit on fuel sales, the retailer must sell 1,280 litres (or 32 fills).
Or, you'll pay.
Prepay, that is
Research into the effectiveness of pre-payment is most advanced in
South Australia. Trials from August to October 2001 confirm that pre-payment
reduces losses. They also indicate that some perpetrators may have
shifted their activities to daylight hours.
| July |
$15,089 |
| August |
$5,647 |
| September |
$8,345 |
| October |
$9,251 |
-
At least 55 commenced the trial, and 69 participants by
October 4 operated pre-pay 24 hours during trial
- Due to drive-offs and inabilities to pay
Source: MTA(SA)
Surprisingly, the survey showed that concerns about
the impact on customer numbers, fuel volumes, and shop sales were
mostly unfounded. Volumes returned to "normal" in a short
period, and shop sales were sustained. There are now about 80 retail
service stations in Adelaide with pre-pay for some part of their operating
hours.
"There are still some issues to resolve, for example
some sites do not have the technology to control pre-payment. And,
some retailers do not want to implement it. The system is aimed at
high-risk areas, where pre-payment at night can also reduce the incidence
of other security problems." Dennis Boldock, Deputy Executive
Director, MTA(SA).
The numbers above do not take into account the cost
to the community in police time.
"The success in SA is attributed to the strategic
partnership between the retailers and the police. If fuel theft is
a major issue, then the trials show that pre-payment can be a good
solution - it is up to the retailer." Neil Smith, Inspector,
Officer in Charge, Crime Reduction, South Australia Police.
What about the honest customer?
According to Wendy Bevan, Public Affairs Analyst with the RAA in South
Australia, there were only five complaints received by the RAA during
the trial, and three of these related to technology. Only two were
concerned about the concept itself.
"Twenty-five of Caltex's 45 Adelaide franchisees
participated in the trial last year and declared themselves very satisfied
with the results. They estimate savings of around $400 a month each.
Caltex provided signage and Point of Sale system enhancements for
its participating franchisees. The feedback from customers has been
good, with most quickly getting used to the procedure and understanding
the reasons behind the scheme." Caroline Ellis, Business Communications
Executive, Caltex Australia.
While Caltex has been directly involved with its franchisees
in the pre-pay trials, Shell has chosen to stay with the post-pay
option.
Shell's preferred payment system is post-pay. It is
not a system issue. It is driven by the customer, and Shell wants
to offer consistency of service and convenience." Vincent Cosgrove,
External Affairs, Shell Australia Limited.
BP and Mobil are monitoring the various trials.
"BP recognises there is a problem at some sites
that lose significant amounts of money. We are very interested in
the results of the pre-payment trials - in particular, the customer
reaction." Bill Frilay, Manager Government Relations, BP Australia.
"Retailers at Mobil branded sites make independent
decisions over these issues. We know that for some the losses have
been significant. We are also trialing a number of different alternatives
for sites impacted by drive-offs. Where we have card readers at the
pump we can offer express lanes such that the outside lanes are set
to only accept card payment. This might affect shop sales but we have
found that time-constrained people who use these pumps voluntarily
have no desire to enter the shop." Anne Rix, Media Relations,
Mobil Oil Australia.
Victoria's trials
Encouraged by the South Australian experience, the VACC and Victoria
Police launched a pre-pay trial in December 2001 through 35 service
stations.
"Any reduction in crime benefits the whole community,
and drive-offs are a preventable crime. If we can reduce theft, we
increase public safety." Sergeant Peter Kells, Community Consultation
and Crime Prevention Office, Victoria Police .
The participating service stations implemented pre-payment
between the hours of 8pm and 6am. In the month preceding the trial,
signs were posted advising customers of the change.
The RACV is concerned that the vast majority of law-abiding
motorists will be inconvenienced should such a system be introduced
in Victoria.
Service stations took away service at the drive way
- the RACV still gets complaints - and turned themselves into convenience
stores. Now, they want to take the convenience away too." David
Cumming, Government Relations Manager, RACV.
It is actively discouraging motorists from pre-paying.
To the disappointment of the VACC, this may have reduced participation
(now 30) in the trial that is experiencing mixed success.
"Drive-offs are inflicting heavy losses on service
station operators, and putting pressure on already very slim margins.
Fair-minded people will accept that pre-pay could be a positive step
towards reducing the theft of petrol from service stations and increasing
community safety. We are astounded that the RACV would seek to scuttle
a trial aimed at examining the pros and cons of a possible solution
to drive-offs." David Purchase, Executive Director, VACC.
Other options
The MTA(WA) and the WA Police introduced a "Drive-off Pack"
from 1 November 2001. Console operators fill in a standardised report
that classifies the drive-off into four categories - forgetful, impulsive,
pre-planned, and stolen car. They fax the report to the relevant police
district where an agreed police response is put into action. At the
same time, the data collected will confirm the extent of the problem
in that State.
"The issue is costly for police who are sometimes
used as service station debt collectors. A forgetful customer is not
a criminal, and it is difficult to prove criminal intent in some cases.
The streamlined reporting system means it is faster to decide whether
to pursue the perpetrator as a criminal. There are some serial offenders.
The best solution is pre-payment." District Superintendent Brian
Cunningham of West Metropolitan Police District.
Other crime prevention measures are recommended - switching
off outside lanes at night, video surveillance, lighting, natural
surveillance, staff training, and signage.
"Stealing is an Offence. Have you Paid?" stickers
are included in the pack.
"Even though feedback indicates the Pack has prevented
some drive-offs and increased the recovery of money from 'forgetful'
customers, the only real solution is pre-pay. But some service stations
do not have the system capability for pre-payment." Tom Spence,
Vice Chairman of MTA (WA).
The MTAQ is reluctant to follow the path of pre-payment,
concerned that it may disrupt the flow of business in the forecourt
and the shop.
"A couple of stations trialled pre-payment from
10pm to 6am but both have since stopped the trial. We are promoting
strengthened surveillance and rearranging the layout in the service
station." Tony Selmes, Executive Director, MTAQ.
It's all part of total service station security
"In most US cities you must pre-pay at night -
this could be the longer-term outcome, unless we find another way
to deal with drive-offs. The broader issue of service station security
needs to be addressed. The major oil companies are cooperating to
exchange information, develop a code of practice and to prepare training
material. We are working with the police in each State, as well as
other industry participants." Bryan Nye, Executive Director,
AIP.
The Code is with AIP members and other contributors for consideration.
It will be available to all retailers soon.