Coles Express: star performer
High levels of customer service and soft drinks drive sales in the Australian convenience store market, according to him!, the shopper insights company.
Him! franchised its Convenience Tracking Programme (CTP) in Australia in 2005 and subsequently launched in New Zealand in 2006.
Barlcay: service-led market
Brett Barclay, who heads up him! Australia, reports convenience store sales are growing by 8% in Australia and by 5% in New Zealand.
“Beverages is the largest profit generator at around 23%, while cigarettes is the largest category representing around 32% of sales and 21% of profit,” says Barclay.
“Food service is improving, built around hot food and coffee and sandwiches, but the market still has a long way to go.”
Speed of service and staff friendliness are rated highly by Australian shoppers, however.
But the convenience market falls down on fresh food, availability and value.
“Customer service is better in convenience than grocery but the shopper considers mainstream grocery to be better at freshness, availability and value,” says Barclay.
Six Australian convenience retailers are on board the CTP initiative: Caltex, Coles Express, 7 Eleven, UCB, Freedom Fuels and Apco.
Combined they represent 65% of the market. In New Zealand, three retailers – Caltex, Mobil and Shell – representing 70% of the market, have joined the programme.
In both countries, petrol forecourts dominate the convenience store market, representing 93% of the sector in Australia and 96% in New Zealand.
Coles Express is the star performer in the Australian market, reports him! Growth is being driven by a strong distribution system (Coles is the second largest grocery retailer in Australia behind Woolworths) and an aggressive push to attract milk and bread shoppers, typically female. A strong promotional programme, driven by up selling by console operators, is having an impact too, says Barclay.
Caltex: investing in store formats
Caltex, the market’s largest convenience retailer, has invested in new store development for the next generation of convenience stores and has been driving strong sales through an increased focus on becoming a retailer rather than focusing on fuel as the driver.
That could be key in coming months.
“The growth has slowed significantly in both markets,” says Barclay. “Anticipated growth was around 9% year-on-year but the last four months have seen the market decline by around 2%...so challenges lie ahead,” he says.
In the wider grocery market private label and discounters, are taking share.
“Private label is becoming a significant player in Oz especially with the drive behind it by the retailers,” says Barclay.
Aldi, meanwhile, has around 200 sites and grabbed 4% market share.
Convenience stores are fighting back, however.
Barclay again: “Coles’ up-sell programme is working exceptionally well and it is exploring many avenues to expand the offer, including pushing beverages over the peak summer selling period. The new concept stores by Caltex offer a ‘grocery pantry range’ tapping into the top up and distress shoppers’ opportunity in this market.”
But fuel will remain key.
“Fuel prices have fallen by 35% since the highs of mid-year but shop sales still remain sluggish so consumer spending is still soft. The expectation is for December to bounce back with fuel dropping down to $1 a litre (high was $1.75) and for the market to continue to improve from there.”
Australia: 4,300 convenience stores
93% of c-store market is on forecourts
Key players: Caltex, Coles Express, 7 Eleven, UCB, Freedom Fuels, Apco
Market growth: +8%
New Zealand: 900 convenience stores
96% of the c-store market is on forecourts
Key players: Caltex, Mobil and Shell
Market growth +5%