Walton: the news is good, in parts
Convenience stores can attract new customers as a result of the credit crunch, according to the IGD’s chief economist James Walton.
Speaking at the IGD’s Convenience Retailing 2008 conference in London last month (November) Walton said consumer research among 1,000 shoppers revealed they were walking to shops and spending more in local stores as strategies to cope with credit crunch.
“It is a fantastic opportunity for convenience stores to pick up completely new shoppers or renew allegiance with shoppers who have lapsed,” he said.
But stores have to be top notch to retain their loyalty, Walton added.
“They only have one chance to make a first impression so the offer has to be compelling. Get it wrong and they won’t come back.”
Walton said once in store shoppers will be scrutinising each purchase decision carefully and it would be harder for c-stores to sell impulse and treat lines.
He advised stores adopted a ‘sword and shield’ strategy. “Defend the sales that you have already got and then exploit the new opportunity.”
Walton presented the convenience opportunity against the economic outlook and what he described as one of the most challenging trading environments.
“2008 has been memorable for the scale of changes we have seen and the sheer speed at which they have unfolded,” he said.
Walton told delegates the year had been dominated by two factors: commodity price inflation and credit crunch.
“None of us have escaped from them in business or our private lives but as far as convenience retail is concerned we are able to pick out a couple of pieces of good news – the news is good, in parts.”
Presenting ahead of the pre-budget report, which included a 2.5% cut in VAT to promote spending, Walton said consumer confidence in the future was looking up and dramatic actions by regulatory bodies and a sense that “things are being done” is reassuring for people.
The latest data from the Bank of England shows a few tentative signs of the credit crunch correcting itself, he added, although it is “early days” and the economy is still “fragile”.
On another positive note, Walton said the recent 1.5% interest rate cut was being passed through to shoppers and commodity price increases had slowed down and reversed over the course of the summer, bringing relief to a lot of people.
Walton warned prices would not return to the lows of the 1980s, however.
“Prices will remain elevated as the pound has lost value on foreign exchanges. Anything we import is now going to be slightly more expensive.
“Looking ahead, the economic consequences are beginning to unwind – the job situation is deteriorating and house prices are coming down - but on the plus side grocery is an industry that deals in essentials.”
Walton said the sector, unlike other industries, had not seen the benefit of previous consumer booms.
“Food retail growth lagged behind total growth in the 90s but food holds up much better when times are hard and convenience is doing even better,” he said.