IGD’s latest grocery market forecast highlights the boom in convenience. The recent spate of activity, such as Morrisons and McColl’s, Tesco and Booker, and B&M and Heron Foods, are all examples of businesses looking to get scale benefits into smaller stores.
Since big operators like Tesco started to successfully translate the value and capabilities of running big stores back into small stores with the likes of Express, the modern c-store has all the benefits of accessibility and is a much better competitor to larger stores in range and pricing compared to the 1970s equivalent.
But the convenience boom is also bringing a challenge: loyalty schemes and reward cards are designed for a large store model. When a customer is spending £50 on a weekly shop, it is worth using a loyalty card for points and offers. But when looking for a sandwich, what matters is convenience and speed - using a loyalty card feels less relevant and more inconvenient. Consequently, retailers end up with misleading data. A customer may be shopping several times a week in smaller stores but not scanning their loyalty card, and shopping less in a superstore. This can make them appear less loyal so they will receive fewer associated benefits because their purchases aren’t tracked.
If your business is based on a database marketing model - true for Tesco and Sainsbury’s and increasingly so for Morrisons - accurate tracking mechanisms are essential.
Small stores attract many different audiences depending upon location. For example, some customers are looking for food on the go, other local residents may be using it as a local supermarket.
To get the balance right between loo rolls and ready meals, the business needs customer basket data to make ranging decisions. So new data collection techniques are needed to optimise these smaller stores.
While ‘scan as you go’ was designed for big stores, if this concept was transferred to the mobile phone it could be very beneficial for small stores; with this one innovation you would solve the data hole, win space from the checkout area and reduce wages.
Amazon Fresh is experimenting with cashier-less, scan-free stores, but there are significant problems with making the tech work. Using phone-enablement seems more achievable.
Convenience retail suits the ‘I have no clue what I am doing tonight’ society. It is an important way for established retailers to compete with e-commerce on convenience, and restaurant home delivery on price.
If retailers have to run their data blind against these data-rich competitors, the potential of this important channel will be wasted.
Tim Mason is CEO of Eagle Eye
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