I was recently asked by the CEO of an international oil business, “what is convenience retail”? This is a great question!
NACS defines a convenience store as a retail business that provides the public with a convenient location to quickly purchase a wide variety of consumable products and services, general food and gasoline. In reality US C-stores remain focused on ‘Cokes, Smokes & Gas’ with some notable exceptions in Cumberland Farms, Rutters, Sheetz, Wawa and other quartile one retailers. Nearer home ACS looks at the consumer’s behaviour in being able to purchase a wide range of products ‘conveniently’. I will extend this definition to include most products and services that can be conveniently purchased at stores, quick food eateries and on-line.
Consolidation and disintermediation is changing the shape of UK convenience in a similar way to Japan in the early Noughties. Ireland’s supply chain consolidation has been underway for some while with more to come. Japan has three of the world’s Top 5 C-retailers in 7-Eleven, Family Mart and Lawson. Their business model is franchising with independent retailers making up some 95% of store locations. They are run as multiple retailers with a 100% supply chain and real time data interchange. Food Service is 50% or more of daily sales with 90% of the 50,000 stores receiving three fresh deliveries each day. Fresh food and food production is proprietary to each retailer. Many stores are hybrid locations with drug stores and restaurants being the most common.
The top consumer need recognised by the leading retailers in the UK, Ireland and Japan is fresh food for now. We all eat and drink with each customer bringing over 1,000 opportunities every year to retailers to fulfil their meal needs. I am surprised to find ambient grocery ranges in UK convenience stores consuming up to 50% of store space for 10% or less of sales. This is not seen in Japan or the world’s top market the USA. A similar picture is seen in the massive ranges of confectionery, salty snacks and soft drinks in the main customer flow locations, sold as a ‘must have’ as they are impulse products. There is an almost uniform ceiling on impulse purchases with ample hard evidence showing that sales increase with curated, smaller ranges. Less is more. When BP added M&S Simply Food to their forecourts, 1,000 Ft² of confectionery, snacks, soft drinks and ambient grocery was removed to make way for the M&S lines. Store sales increased 150%. Sales of the impulse categories increased over 20% demonstrating that it is more customers that buy more and not more range and space that sells more products.
Irish retailers such as IROF’s own Tom McAvoy and Thomas Ennis are in my global ‘Top 25’ fresh food convenience retailers. They expertly mix up proprietary, local and national branded food, drinks and snacks to bring customers a unique offer that cannot be experienced elsewhere. Family Mart Japan http://www.family.co.jp/for_tourist/en.html is also in my Top 25 as they have over the last 15 years successfully differentiated their 18,000 plus stores with unique fresh foods and drinks, whilst bringing the best innovation from the branded supplier community in impulse products. Their data insight is so good that they know within one week if a new product has succeeded or failed! When a product fails it is delisted immediately.
The message for UK and Ireland retailers experiencing today’s massive structural changes is that the world’s number two market Japan got there before us. We can learn from their retail evolution. Japanese C-retailers succeeded by differentiating their stores by focussing on the daily need of all their customers to eat and drink whilst stocking a curated, small and often tiny range of bar coded items.
So what is a convenience retail? Today it must conveniently offer customers a relevant fresh food and drink offer with an on-line and mobile ordering option for at least breakfast, lunch and snack times. Dinner should be next and soon.
No one ever left a convenience store wanting bleach because it only sold Domestos blue!
The IROF visits Tokyo and Hong Kong in March 2018.