By Keith Reid
Exactly three years ago Fuel Oil News covered a new company, SmartClick Energy, that offered an affiliate program for industry heating oil dealers with an online buying experience for the customer. The goal was to sign dealers to specific territories throughout the Northeast and Mid-Atlantic States to generate incremental gallons beyond their existing customer base. SmartClick would market the program, find these supplemental customers and handle all of the back office headaches. The dealer essentially receives a negotiated delivery fee for fulfilling the service.
Shipley Energy, a leading, highly diversified energy marketer in the Northeast acquired SmartClick in May of 2015, and after an overhaul has just relaunched the program this January as SmartTouch Energy.
As it stands now, the company has 46 different partners (and growing) with a footprint that extends from Baltimore to Bangor Maine. Operators range in scale from smaller companies with four or five trucks doing perhaps 2 million gallons per year, to some with 50 vehicles doing perhaps 50 million gallons per year.
Fuel Oil News interviewed Steven Downey, the company’s president, for the rationale behind the acquisition and for where Shipley intends to take the program moving forward.
FON: What prompted the acquisition?
Downey: We were actually looking to do something similar and then we were contacted by a broker with the opportunity. We opened discussions and we really liked the business model. As an industry we’ve lagged a bit behind how other industries are serving their customers. If we can do a great job and serve the consumer in the way they want to be taken care of, when they want to order, how they want to order and the convenience factor then we are going to be able to grow and expand compared to the competition. And we can do that as a team. We hope to more than double the number of customers and the size of the business in the first year.
FON: On the technology side, how much reworking was required after the acquisition?
Downey: Fundamentally the platform functioned, but it needed some work. We wanted to make it a better customer experience. We wanted to make it faster and more accessible to mobile devices. Some 45% of our traffic comes from mobile devices. We made a range of changes to make it more functional for both our customers and dealers.
FON: You have such a mixture of operations, what provides the common appeal?
Downey: What brings them together is they all want to grow. The other thing is that they really understand the financials. They realize that they may not get their normal margin on the gallons delivered for Smart touch, but since we carry the entire customer acquisition and servicing costs, collections— this optimizes their fleet operations and brings down the overall cost per gallon to deliver fuel.
FON: How do you handle territories?
Downey: we essentially do that by ZIP Code. When we partner with somebody that ZIP Code is essentially their dedicated territory. We’re not a broker in the sense that we have multiple operators serving the same territory. And as long as they can keep up with the deliveries in those territories there’s no need to make any adjustments.
FON: How is fuel supply handled?
Downey: We have about four companies in the network that we supply, but that’s not necessarily tied to SmartTouch. What we do is reimburse the dealers in the network for the fuel costs at the OPIS averaged on the day of delivery at their closest rack location. So if they have some good purchasing practices that can add a few extra pennies—or more. By pricing on day of delivery we protect our partners in case the price goes up in between when the order is placed in the fuel is delivered. Typically, these orders are fulfilled within three days, and usually two.
FON: How do you price fuel to the customer?
Downey: We try to be competitive. We’re not trying to be the cheapest provider. But we are typically going to be in the bottom half or bottom third of the market pricewise, and hopefully competitive with a lot of the cash providers. We think there is significant value in the level of service we provide and the convenience of online ordering.
FON: What purchasing options does the customer have?
Downey: They can purchase fuel load to load, and we offer an auto fill program based on our k-factor forecasting system. And customers that use the auto fill program receive a 3-cent discount.
FON: What is the technology requirement for your dealer partners?
Downey: It’s really interesting. We have dealer partners who are very large and still do everything on paper, and smaller operations that are highly automated. We have a portal that everybody receives their orders through. They get notifications through email and then they go in and put in the expected delivery date, make a delivery and handle that all in their own systems, and they update through our portal how many gallons were delivered. Although we still have the manual component it takes about 10 seconds per order. We’re working on doing an active integration with a couple of the software programs out there.
FON: Who owns the customer?
Downey: We own the customer, though they should be served by the same dealer every time. But, if there are any issues that arise the customers call us and not the dealer, and the dealers like that. Our partners are free to market their own operations in these areas–the only thing we ask is that they do not specifically market to the customers they serve as for us. If they put up a billboard and one of our customers ends up liking a promotion and going over to them, we won’t begrudge that. They are a partner of ours and we want to see them grow.
FON: What’s happening on the HVAC side?
Downey: That’s moving fairly slowly. We probably have 10 or so partners in that network. When we bought the company this was very new. We’ve grown the territory by about 2 million homes, in terms of the service area, and promoting this is a focus for this spring. It’s essentially a tune-up contract and then the customer will have somebody local for service. It’s a little different in terms of the backend if there is an installation, etc. We ask the local partner to explain to the customer what’s going to be replaced, quoted the job, get the signature and enter it in the system, then we bill the customer.
FON: How does this integrate competitively with Shipley’s operations?
Downey: Right now Shipley is one of our largest dealers. We treat Shipley mainly is just another dealer. An organ to be adding other products such as propane, electricity and natural gas and in Shipley service areas those will obviously be Shipley products. But we will be looking for partners in other areas.