Online Lubricant Sales Poised to Become Significant Factor in the Next Five Years

LITTLE FALLS, N.J., April 8 -- E-commerce and online selling and ordering have become critical to the success of many industry sectors over the past few years, but in the lubricants business, selling product online still remains a challenging prospect, due to significant cultural and technological barriers. However, despite a relatively low adoption rate thus far, online lubricant sales are poised to become a significant factor in the near future, according to a recently completed study by Kline & Company.

Online purchasing of lubricants is forecast to grow more than sixfold, from 6% of all lubricant sales transactions in 2001 to an estimated 33% in 2005, and is expected to continue to increase as a percentage of overall sales thereafter. This equates to growth from 185 million gallons for online transactions of lubricants in 2001 to 540 million gallons in 2003. By 2005, the total U.S. market for online transactions of lubricants is forecast to reach more than 1 billion gallons, representing an average annual increase of 52% from 2001.

``Much of this growth early on is expected to come from such industrial markets as oil and gas extraction, transportation, construction, electrical equipment and power generation, and fabricated metals,'' says Geeta Agashe, director at Kline & Company, a leading international business consulting firm based in Little Falls, NJ. ``Such commercial automotive and industrial markets as primary metals, printing, transportation equipment, food processing, machinery, and mining are also forecast to join the online transaction bandwagon in a big way during this period.''

According to Kline's study, SELLING LUBRICANTS ONLINE 2001, most major oil companies have made significant investments in e-commerce and have implemented a variety of supply-chain-enhancing initiatives. These investments range from building sophisticated private Web sites to participating in public e-marketplaces. The leaders in e-business initiatives include such stalwarts as Equilon, ChevronTexaco, and ExxonMobil, although most of the other major oil companies have made significant investments as well. In addition, many of the startup e-marketplaces have gone out of business, leaving a smaller number of stronger competitors such as FuelQuest, Pantellos, and W.W. Grainger.

Thus far it has been a challenge for these companies to convert most of their sales transactions to e-initiatives because their distributors and end users claim to see no clear cost benefit, lack the technology on their end, or have a limited education about selling online. And, according to Agashe, ``Many end users simply prefer the old-fashioned way of doing business.''

However, several driving forces should provide a wealth of opportunities to astute online lubricant marketers. These include new electronic standards that will make data exchange far easier, widely available open-source software, and the continuing proliferation of broadband Internet connections. Other factors include more sophisticated but user-friendly trading platforms and the gradual elimination of cultural barriers to online transactions.

These and other trends are covered in SELLING LUBRICANTS ONLINE 2001, Kline & Company's first comprehensive syndicated analysis of this developing trend in the U.S. lubricants market. The study provides an in-depth analysis of online selling options, demand estimates, end-user trends, organizations involved in the supply side, and an outlook to 2005.

Established in 1959, Kline & Company, Inc. is an international business consulting firm that offers a broad range of services to the petroleum and energy industry. For information on how to subscribe to SELLING LUBRICANTS ONLINE 2001, or to inquire about how Kline can assist you in customized consulting engagements, contact Geeta Agashe at Kline & Company, Inc., 150 Clove Road, Little Falls, NJ 07424-0410; at (973) 435-3484; or via e-mail at Geeta_Agashe@klinegroup.com.