With the UK convenience channel set to reach £47.2 billion by 2023, the emphasis on convenience stores has never been stronger. Maria Highland examines why…
The past couple of years have seen a major shake-up in convenience retailing including the Co-op’s takeover of Nisa Retail, Tesco’s takeover of Booker, the closure of Palmer & Harvey, and the sale of Conviviality’s wholesale business to C&C.
Food and grocery research organisation IGD’s forecasts that the UK convenience channel will benefit from strong store growth. 2018 figures show the convenience market worth to be £40.1 billion, with a predicted change in value of +17.6 per cent, to £47.2 billion by 2023.
Despite its modest growth, the convenience channel is set to deliver the second biggest gain in sales, meeting the growing demand for smaller and more frequent shopping trips.
IGD director of insight Simon Wainwright says: “Major opportunities exist for making c-stores front of mind for shopping trips, particularly those that help shoppers save time. Younger shoppers are key to growth as they are predisposed to shopping at c-stores for more shopping missions than older shoppers. Having grown up in the era of ‘new convenience’, offering wider ranges, longer opening hours and supermarket quality, younger generations will be key to driving ongoing growth, but have high expectations that need to be met.”
Likewise, senior business analyst at IGD Patrick Mitchell-Fox, highlights three factors underpinning the success of the UK convenience channel: younger shoppers, speed of shopping and the targeting of more shopping missions. He supports Wainwright’s point of younger shoppers being a key driver. He explains that new ‘post-millennial shoppers’ are used to stores with longer opening hours that offer great quality products. However, he adds, “while they are key to driving growth, they also have high expectations that need to be met.”
Convenience stores will also experience growth “as shoppers shift away from the weekly shop to more frequent shopping,” continues Mitchell-Fox. Speed of shopping is now a key requirement and an important advantage for convenience stores. “Further enhancing how quickly shoppers can navigate stores and purchase products will be central for the convenience channel,” he adds.
Convenience stores can also expect growth by targeting more shopping missions more effectively. “While topping up the weekly shop remains the main reason for shoppers to visit convenience stores, retailers are also focusing on driving other ways to encourage shoppers into store with more enticing ranges of food-to-go and evening meal solutions,” says Mitchell-Fox. “While some traditional categories, like tobacco and news, are in decline the rise of new footfall drivers such as fresh coffee and services like parcel collection are encouraging more shoppers into store more often. In addition, the growing provision of ‘dwell-space’ is also encouraging shoppers to spend more time in store.”
Likewise, RELEX Solutions forecast in its Retail Supply Chain and Space Planning Predictions for 2018 that there will be an increased focus on fresh foods and convenience and space awareness. And it was not wrong. “More UK consumers are moving towards purchasing healthier foods and retailers must take into consideration their changing tastes, as they move away from high sugar content, packaged, frozen and manufactured foods towards healthier, fresher and free from options,” says RELEX. “In a competitive retail environment, having the product the customer wants, where and when they want it, is increasingly key to meeting consumer expectations and bottom line growth.”
SCALA director Dave Howorth backs this up, noting that “along with discounter stores and e-commerce, convenience is a big growth area, particularly in grocery retailing. Convenience seems to meet all the requirements of today’s shopping habits. Smaller, local stores suit the increase in “little and often” shopping. Reducing levels of car ownership among increasing numbers of city-dwelling millennials also make smaller shopping trips more practical. Convenience also works in an age where time is a precious resource (who wants to take two hours doing a big weekly shop at an out of town supermarket?).”
Howorth also highlights that “convenience also suits the on-demand culture of today’s consumers, for example a startling fact is that 50 per cent of people don’t know what they are having for their evening meal as they leave work and will pick up supplies on their journey home.” Therefore, it is beneficial for convenience stores to begin to offer consumers evening meal solutions to drive profit growth.
However, when it comes to providing a quick meal alternative, convenience stores are in competition with fast food provers and delivery providers, especially those which allow orders to be made online. And even though e-tail and online purchasing is on the rise, it has yet to knock brick and mortar stores out of the park.
Likewise, IGD research has also found that although larger stores are the most visited channel with 98 per cent of shoppers visiting at least once in the last month, 89 per cent of shoppers also visit convenience stores at least once a month.
As highlighted by Howorth, convenience stores are perfectly suited for people needing to pick of last-minute supplies without needing to sit down and order things and wait for their arrival. It holds its own purpose.
Blue Yonder chief executive Uwe Weiss explains that “there is still a clear appetite for physical stores, as evidenced by JDA’s just-launched Global Consumer Survey, which found that 50 per cent of UK shoppers prefer the in-store experience to any other. However, it is equally apparent that while consumers may not expect ‘brick and mortar’ retailers to match Amazon’s levels of convenience, they do expect them to do the basic fundamentals of retail properly.
“According to JDA’s research, the most important aspect of the shopping experience for almost half (47 per cent) of UK consumers is product availability,” says Weiss. He also explains that although “consumers’ shopping habits are less predictable than ever before, retailers have access to vast reams of data, including past sales patterns and customer footfall.”
Technology plays a major role in boosting store efficiency and streamlining processes, especially in a smaller scale convenience store. “By understanding and analysing this data with technologies such as artificial intelligence (AI), retailers can extract actionable insights and value from to help them better understand consumer demand,” says Weiss.
And such solutions can go beyond making predictions and providing insight, they can deliver better replenishment decisions to retailers to help with the issue of smaller storage space faced by convenience stores.
Dave Howorth also draws on this issue, noting that a “significant downside (from a logistics perspective) is space. Convenience stores are a lot smaller than traditional supermarket stores, leaving little room for product, be that on the shelves or in a stock room.”
And “this lack of space also means a higher frequency of deliveries are needed to keep shelves full,” continues Howorth. “This is fine when it comes to fresh fruit and veg that has a short shelf life, but not so great when it comes to items that can be stored for long periods of time, as this high frequency of deliveries can become disruptive.
This leads onto another logistical headache for convenience stores: location and, more specifically, access. As convenience stores are usually situated on busy high streets or garage forecourts, littered with pedestrians, this can prove to be a nightmare for large and medium-sized delivery vehicles that need to get as close to the store as possible,”says Howorth.
Therefore, excellent planning is crucial to convenience stores. Even more so in peak times. “For example, multiple temperature deliveries stocking up on frozen, chilled and ambient goods at the same time is crucial. As is planning stock around the smallest case sizes that suppliers can offer,” says Howorth.
“By looking at such options it is possible to minimise the number of deliveries, ensure that these ideally occur out of hours (early morning and late evening) and therefore keep store disruption to a minimum and the impact on customers low.”
Overall, “to maintain economies in the convenience sector, maximising the number of store deliveries per vehicle is essential,” explains Howorth. “Having a regional network with distribution centres and vehicle outbases close to store locations helps with this. However, lower volumes mean that networks need to strike the right balance as regional-based networks increase the cost of supply to the regional distribution centres.”
Again, technology can help with such situations. Routing and scheduling software can help to ensure that delivery plans cater to consumer need. For example, John Lewis’ transport management team creates daily transport plans to manage their click and collect and store replenishment requirements using Paragon’s routing and scheduling software.
For John Lewis, the delivery plans need to be highly-efficient and 100 per cent achievable to keep up with its customer service promise, which includes post-2pm next-day collection for all click and collect orders. By “planning more tightly so we can make better use of our resources and target continuous improvement is one of a number of ways we achieve this,” explains John Lewis head of central operations and transport, Ben Farrell.
“Retailers are facing increasing pressure to keep control of costs and provide a quality service to the consumer. Our routing and scheduling software has always been a powerful tool that has helped retailers to enhance and optimise transport planning,” added Paragon Software Systems managing director William Salter.
With careful planning, storage space doesn’t need to be a major issue. However, “as the fight for space intensifies and the desire for urban living expands, so will the demand for smaller local stores that serve the ‘need it here, need it now’ generation,” says Howorth. “Convenience stores do exactly this, providing the consumer with whatever they need, whenever and wherever they need it.” Therefore, the rise of convenience store is far from over.
This article first appeared in Logistics Manager, December 2018
