Convenience retailing is in flux. It is about being consistent but also individual and local. It is increasingly ethical and environmental. It is about food-to-go, food service and self service. It is about low prices and flexible pricing. It is about value ranges but also premium offers. Critically, convenience is growing.
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Jerry Marwood: retelling the story |
Those were the key take-aways from the Insight NACS Future of International Retailing Conference held in London last month, 14-17 September 2009.
Opening the convenience-focused conference, Mike Greene, ceo at Him! advised delegates to focus on similarities across markets.
“What shoppers want is pretty consistent about 80% of the time,” he said. “The 20% is the icing on cake.”
Greene highlighted key trends benefiting convenience including entertaining at home, drinking alcohol at home, walking to stores, cooking from scratch and setting weekly budgets.
Greene reminded delegates there is not one type of shopper.
“Shoppers are changing and could be 10 different personalities in one day. Shoppers change by mission, by time of day and by day of the week.”
Price is a key driver but availability is more important. Greene reported 38% of shoppers planned to buy more own label in the year ahead but preferred brands, 58% buy more promotions and 57% check prices. Bogof promotions were popular earlier in the year but now shoppers prefer cheaper prices and price marked packs, he said.
Greene singled out companies that are doing things differently including 7 Eleven Norway and Tates Spar (multi-media screens), McDonald’s (Wi-Fi and breakfast) and JD Wetherspoon (breakfast and right people) and urged delegates to “take away at least two things and do something different”.
Debbie Robinson, director food retail marketing at the Co-operative, focused on the retailer’s ‘good with food journey’. Following the Co-operative’s acquisition of Somerfield, the group operates 4,000 stores and trades from 12bn sq ft. Robinson said small stores and petrol forecourts account for 41% of sales but supermarkets are increasingly important.
“It’s a business of two halves and we need to think carefully about how we capture sales in these formats.”
Like Greene, Robinson said there was no point targeting a specific group of customers. “Location is the key driver of business. Most people buy the same things or similar things,” she said.
Robinson also highlighted what customers are doing more of: cooking from scratch, buying healthier products, buying in line with their values, planning more carefully and buying more Fairtrade products.
Robinson recounted the Co-operative’s ethical heritage - launching Cafe Direct in the eighties but advised delegates: “Ethical policy cannot be a crusade, you have to relate it back to the customer base. The world is changing and ethics is no longer a point of differentiation. In a few years it will be essential.”
Robinson revealed the Somerfield acquisition brought a huge opportunity in terms of scale and said the Co-operative had wasted not time in converting stores. The retailer has also completed a project on range - reducing the inventory in ambient categories and increasing the amount of fresh.
“It was the biggest challenge in the business,” she said. “The problem was there was too much choice. Less really is more.”
Robinson said own label was a key vehicle and the Co-operative’s 3,000 skus were worth £1.65bn in sales. Simply Value is the entry level own label. “It was hugely successful in Somerfield but we don’t see a role for Simply Value in c-stores, except tactically,” she said.
The standard own label accounts for 80% of sales and is outperforming the marketplace, said Robinson. Truly Irresistible, the premium brand, offers 350 products and “growth is absolutely massive”.
Robinson also highlighted a trend to “scrimp and splurge” with shoppers penny pinching throughout the week but buying into more premium products at the weekend.
“The trends are brilliant for retail but it is not about going after one single thing or one customer proposition.”
Helen Felde, chief concept developer at Statoil Norway, and James Simpson, managing director of The Food Service Centre, revealed how the companies launched a new food-to-go brand called Made To Go into seven markets.
Statoil Norway retails in eight markets across Scandinavia, the Baltics and Russia, and operates 2,500 full service petrol stations.
According to Felde, the aim was to be “a convenience retailer beyond consumers’ expectations, offering fuel, car wash, convenience and food-to-go”.
The Made To Go brand spans sandwiches and salads and comprises three sub brands: classic, balanced (wholesome not dietary) and special.
The range was trialed in Denmark and Poland before further roll out. Simpson reported Made To Go was growing strongly, despite initial challenges in distribution. Statoil Norway plans to extend the Mde To Go brand to other products across the shop.
Jerry Marwood, managing director of Spar UK, which has just reported like-for-like sales growth of 5.2% for the three months to July 2009, said the challenge for independent convenience stores is to find something to do differently that competitors cannot easily copy such as being local.
“Localisation is about getting the closest fit with the right product, in the right place at the right time but in different locations,” he said.
Marwood told delegates Spar’s formats programme adopted a bottom up approach by identifying clusters of people and then understanding and meeting their needs exactly.
“It’s a different mentality. We build from the bottom up. Using the 80/20 rule, 80% stays the same and 20% is used for innovation. Our formats programme is designed to identify the bits that are unique.”
Marwood said there was an opportunity to further exploit that 20%. Transient stores, for example, don’t feature frozen but they could offer frozen confectionery, he said. Similarly, local foods, which account for a small percentage of a supermarket’s total sales, could account for 30% of a convenience store’s range.
“Consumer research shows customers want to support local businesses but they want clean shops, appropriate ranges, availability, fair prices and efficient services,” he said.
Marwood said Spar’s stores of the future initiative evolved its six store formats continually and he revealed ways in which Spar stores were customising their businesses. A new Eurospar in Wales, for instance, features solely Welsh signage and stocks local fish. Sausage and bacon Sizzlers, seen in the US market, have also proved popular in Spar’s UK stores.
Marwood said stores in London were participating in a contactless payment trial while the store manager of Spar Great Kingshill in High Wycombe is hosting customer focus groups at his home ensuring “shoppers are involved in solutions”.
Marwood said achieving brand consistency is important but questioned if the balance has moved too far away from the individual.
“We need to find a way of retelling the story,” he said.
Next month: Asda pioneers in self-checkout, Shell gets flexible on pricing, PetroChina unveils its U Smile c-store brand, TNS has the retail detail and Jonathan James’ independent vision.