Convenience retail is ‘thriving and here to stay’ as long as it’s relevant
The Co-operative Group's recent report on convenience retailing indicates that buying smaller amounts locally is in favour with shoppers

Convenience retail is ‘thriving and here to stay’ as long as it’s relevant

Gill McShane
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If the UK consumer’s needs and behaviours are re-shaping for good as discount retailers bring their value proposition into the mainstream and shopping across multiple channels becomes the convenient norm, how can physical convenience stores ensure their survival? Produce Business UK shares the opinions of executives from three of the UK and Ireland’s leading retailers: Jill Bruce, head of food business development and international at Marks & Spencer; Chris Martin, CEO of Musgrave Group, and Andy Rowlinson, former operating model director at Tesco

Last month (July), major c-store operator The Co-operative Group published its Convenience Retailing report, which charts the last 50 years of convenience retailing. The retrospective revealed both challenges and opportunities for the convenience sector.

Highlights of The Co-op’s report:

  • Brits are spending less comparatively on food. In 1965 we spent on average 23% of our income on food, compared with just 11% today.
  • Millions are stepping back to the way they used to shop for food in the 1960s, before the advent of huge supermarkets and fridges, freezers and microwaves.
  • The big monthly shop is phasing out. Buying smaller amounts locally is in favour, and reflects exactly what was happening 50 years ago.

Regardless of the shifts in consumer and market behaviour, however, Bruce, Rowlinson and Martin all agree there is a place for c-stores to thrive in the UK – as long as they adapt and remain relevant.

Rather than competing, they say c-stores need to carve out their competitive edge through differentiation – by being truly local and convenient, by innovating and customising their offer to resonate with their unique customer base, and by following the principles of hospitality.  

“I’m convinced there will still be a strong, physical convenience retailing industry in 10 to 20 years’ time,” states Bruce, who is also credited as being ‘the creator’ of the M&S Simply Food c-store concept.

“It’s all about keeping up with our customers and being relevant. We have to stay connected [to customers]. There are a lot [of c-stores] around so they have to be attractive and more relevant than just for buying milk and bread. Some c-stores have remodelled their own label and gone to brand-only so they’re not differentiating. Being convenient is all about having that local place to go.”

Rowlinson, who was reportedly instrumental in launching Tesco’s online service, agrees that convenience store operators will be around for a very long time – even more so than the big box retailers. “There’s a good future ahead,” he notes.

“C-stores just have to be relevant, so think convenience. The move to branded goods comes from pressure on margins, but then you move away from being local. Customers want local services like dry cleaning and click-and-collect, provided it’s done well, so c-stores could be used as a service hub too. Promotions also need to be fewer and more meaningful.

“There’s an opportunity to be far more local, to understand the local market and align the assortment [to that market]. When you do that, you’re winning.”

Going one step further, Musgrave Group CEO Martin argues that it’s a “very exciting time” for convenience retailers thanks to new trends and channels. “The hope is that we’ll have thriving local retailers who have adapted to what people want,” he explains.

“It’s very clear that convenience shoppers want it [the experience] to be easier. We have to innovate strongly. There are a number of trends [to follow] – health and wellness is a huge opportunity. Omnichannel and adapting to social media are also very important. We need to be simpler and find different ways to engage with customers.”

Growing appetite for fresh food

As part of the health and wellness trend, Bruce says M&S is seeing a larger and larger appetite in the UK for fresh, convenient food. “Fresh food will continue to become a bigger and bigger part of convenience retailing,” she predicts. “I think the c-stores that don’t offer fresh food will become less relevant.”

To tap into the fresh food arena, the keys to success are pretty basic, according to Bruce. C-stores must deliver a quality product that’s cooked or prepared well, with a rotation of choice that satisfies what consumers want. Indeed, if the quality is not good, Bruce says it doesn’t matter how convenient you are, since some people are not prepared to compromise on quality for efficiency.

“[For hot food] staff in-store have to be trained properly too,” she adds. “And you need the right person to engage with customers. M&S is relatively new in immediate hot food within the store and we’re learning all the time. We believe we’ll crack it – you need a balance between speed and quality, combined with hospitality delivered by the right people.”

Rowlinson concurs that c-stores should not underestimate the importance of hospitality. “It relates to the local butcher where there’s been a renaissance,” he explains. “Local butchers are able to offer service, hospitality and a level of expertise. In c-stores, we’ve taken that level of skill away and ended up not being great at anything. Hot food is always a challenge. Even bakeries are often poorer [in standard] than they could be but small improvements would bring big changes.”

Countering the potential threats

Hard discounters

With the discounters here to stay, Martin and Bruce advise c-store operators to focus on the value and quality of their offer.

“The shopper has changed and the identity of the discounter is now more like a mainstream multiple – they are driving value,” explains Martin. “Aldi and Lidl are very much a part of the shopper mindset. The shopper’s reference point is now the discounter so you’ve got to work on your value proposition.”

Since Musgrave operates both supermarkets and c-stores, the retailer has witnessed first-hand the competition from Aldi and Lidl. To retain its attraction, Martin says the group has been focusing on quality and working very hard on productivity.

“You’ve got to look at your good, better and best ranges,” he says. “The discounters have been very clever at introducing their own brand. They have assimilated themselves well to selling local products too and their range has expanded to foodservice. Mainstream retailers will need to develop their own brands to compete, and focus on quality.”

While M&S Simply Food’s offer is removed from that of the discounters, Bruce admits that the retailer can’t be ignorant either since M&S customers shop in Aldi and Lidl too. “M&S hasn’t seen much of an impact because our offer is differentiated enough from the discounters as so much of what we do is fresh,” she explains.

“But M&S is paying attention. Aldi and Lidl have moved into fresh and become more relevant. They have made inroads and are doing very well. The quality of some of their products is very good – they’ve even won awards.”

Online shopping

According to NACS (the National Association for Convenience and Fuel Retailing), 67% of British shoppers are buying groceries regularly online and by 2016 the UK will have doubled its penetration of online shoppers.

Although some might consider online shopping to be the ultimate in convenience, Bruce and Martin point out that c-stores can and still need to engage with shoppers who have a preference for online.

“How you’re engaging online is as important as how you’re selling online,” Bruce says. “People want information about food, not just about buying it. We are also seeing that click-and-collect is bringing in customers into Simply Food stores where hopefully they’ll pick up some food at the same time.”

Martin agrees that online is important for the convenience sector, adding: “Interestingly, we still need to use online in convenience. You need to think about how your brand is accessed online, how your brand is represented online, and how it represents you.”

Multi-channel

While there may be a growing number and increasingly convenient ways for consumers to buy their groceries other than the local corner shop, the trio are confident all is far from lost for c-stores.

“The customer who shops across more channels are those who spend more with you because you’re answering more of their needs,” Bruce points out.

With that in mind, Martin says Musgrave has looked at multi-channel as a means of accessing customers. “They’re looking for access to products but also for local stores to be part of their daily lives,” he says. “Speed is important but people do want a conversation and to understand what the product is.”

Rowlinson adds that retailers need to understand all of the different ways people want to shop and bring those channels under one brand that consumers trust. Ultimately, he says shoppers just want it easy.

“Click-and-collect, for example, is a lot more convenient than waiting in for your delivery,” he explains. “The challenge for a lot of c-stores is their facilities – there is only so much space and only so many services you can provide. And you can’t promise what you can’t deliver. Convenience is about having everything all in one place – a one-stop shop.”

Bruce, Martin and Rowlinson discussed their views on the future of convenience retailing during a ‘Retailer Roundtable’ session at the recent NACS Insight Convenience Summit – Europe in London.

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