From Dr Mark Dorgan, PA Consulting Group
Sir; Why is the convenience market now becoming attractive to the big retailers when c-stores are so notoriously difficult to service and they have all been moving out of town?
Firstly, whereas out-of-town stores provide the space to create a better shopping experience and availability at lower cost, these stores are remote from the consumer.
Impulse needs and smaller purchases will always go to the closest location to home and price is often unimportant. If this market provides just a few percent additional penetration for a grocery chain and the cost to price formula can be optimised, then this is attractive.
A second reason why c-stores are attractive is that they provide the missing link in the online delivery supply chain. C-stores will provide a neighbourhood depot and local point of despatch for online purchases for both food and non-food. This could change the economics of both the online business and the traditional c-store so both become much more profitable and therefore more attractive.
In terms of how best to make convenience work in a grocery portfolio, one more radical option the grocers may want to consider is franchising.
Sainsbury has put a toe in this market with its supply of Sainsbury’s product to village stores, but something bigger and more aggressive is needed. Perhaps the retention of the Bells team to manage the chain represents a move in this direction by Sainsbury.
Such a move could give the independents the opportunity to look at other options that combine local entrepreneurial knowledge with big brands better to meet local needs.
Sir; Why is the convenience market now becoming attractive to the big retailers when c-stores are so notoriously difficult to service and they have all been moving out of town?
Firstly, whereas out-of-town stores provide the space to create a better shopping experience and availability at lower cost, these stores are remote from the consumer.
Impulse needs and smaller purchases will always go to the closest location to home and price is often unimportant. If this market provides just a few percent additional penetration for a grocery chain and the cost to price formula can be optimised, then this is attractive.
A second reason why c-stores are attractive is that they provide the missing link in the online delivery supply chain. C-stores will provide a neighbourhood depot and local point of despatch for online purchases for both food and non-food. This could change the economics of both the online business and the traditional c-store so both become much more profitable and therefore more attractive.
In terms of how best to make convenience work in a grocery portfolio, one more radical option the grocers may want to consider is franchising.
Sainsbury has put a toe in this market with its supply of Sainsbury’s product to village stores, but something bigger and more aggressive is needed. Perhaps the retention of the Bells team to manage the chain represents a move in this direction by Sainsbury.
Such a move could give the independents the opportunity to look at other options that combine local entrepreneurial knowledge with big brands better to meet local needs.
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