You'd think c-stores would be finding the current economic climate tough going. Not so. C-store sales broke the £30bn barrier last year, it was revealed this week.
Unsurprisingly, growth is being driven by greater demand for promotions, according to a poll of 25,000 c-store shoppers by Him! Research & Consulting. When asked, 15% said they were buying more products on promotion than last year and 9% were adding a greater number of cheaper variants to their baskets. But 8% were buying more fresh produce suggesting that value for money is not the only priority for shoppers.
The fact that c-stores are now increasingly meeting the demand for a stronger fresh range and more promotions is enabling them to compete more effectively with the big box multiples. Indeed, they are gaining ground: figures from IGD this week revealed that value sales in c-stores grew 6.3% last year, increasing the sector's share of the grocery market to just over a fifth.
Convenience is set to be the scene of increasingly fierce competition, as the land grab for small format retail space spirals and the multiples continue to muscle in on this growth sector. So how have the independents sustained their growth in this harsh environment, and will they be able to keep it up?
"Primarily it comes down to the way shoppers shop and live over time," says Him! CEO Mike Greene. "People are buying less, more often. That's why all the supermarkets want to get into c-stores."
And they're ramping up their estates all the time, with Tesco planning 150 Express stores a year and Sainsbury's eyeing 100 Locals.
The attraction is obvious. On average, shoppers visit their local store 3.7 times a week, according to Him! This has driven change and not just in the kind of food on offer. "Fresh has become the foundation of convenience over the past 10 to 12 years," says Greene, adding that in more recent years, there has been a change in the promotional tactics deployed by the sector luring yet more customers.
"We are probably running fewer promotions than we were a year ago, but the depth of them has increased and they are publicised more heavily," confirms Kishor Patel, board director of Nisa Holdings and owner of six c-stores.
Advances in EPoS and IT systems have allowed convenience players to step up promotions. It's now up to the sector to "shout from the rooftops" the quality and value of their goods, says Patel.
However, while "the world has gone promotion crazy", the depth of promotions will never be as important in c-stores as in the multiples, says Greene, because the average basket price is lower, and therefore so is the saving expectation.
With the growing incursion of the supermarkets into c-store territory, the robustness of independents' supply chains will prove crucial. In order to compete with those of the giants, they will need to strengthen their own. Greater responsiveness from wholesalers and suppliers to ensure stores have the goods consumers want when they want them will be required.
"What we need is next-day deliveries," says Patel, who sources most of his lines from Nisa, but tops up from local suppliers when goods are needed urgently. "Whichever supplier goes to next-day deliveries first, allowing us to respond quickly to instances like the hot weather we've just had, will be a big winner."
Commentators agree c-store success rests on three pillars: product availability, product quality and value for money. For the independents, each one of these will require strengthening as the multiples continue to pile on the pressure.
Small is beautiful
- Shoppers visit their local store an average 3.7 times a week and 24% visit daily
- 60% would buy loose fruit and veg from c-stores
- 9% of shoppers arrive intending to buy items on promotion, but 14% actually do - that's a 55% increase on conversion
- Availability of products, rather than price, is the key concern for shoppers
- The key area where shoppers feel c-stores could improve is in offering a wider range of products Source: Him!