Three tips to help you benefit from convenience channel growth

Date : 18 June 2013

The convenience channel is going from strength to strength. Our latest forecasts show that the channel will continue to outperform the wider UK grocery market, and will be worth £46.2bn by 2018, up nearly £11bn from 2013.

So, how can retailers and suppliers best meet the needs of convenience store shoppers, as they look to improve the shopping experience and drive sales? I’ve accompanied convenience store shoppers in store as part of our latest ShopperVista research, which has helped me put together three tips that could help you share in this success story. You can read the full research with a subscription to our ShopperVista service

1. Understand what’s really behind convenience channel growth

There’s more competition than ever in the convenience channel. This is good news for shoppers as convenience stores adapt to what shoppers want and become increasingly innovative.

From our research, convenience multiples were the fastest growing segment in the 12 months to April 2013, with sales up 8.4%. Given the opportunities in the channel, big supermarket chains are expanding their convenience store estates and using their scale to provide shoppers with attractive product ranges and consistent in-store service. Some key recent developments include:

  • Sainsbury’s announced it will operate more convenience stores than supermarkets next year and is planning to open around 100 new convenience stores per year
  • Tesco’s key trading priority is to reach the shopper by becoming the best multi-channel retailer and to tailor ranges accordingly. Tesco recently announced that One Stop, a wholly-owned subsidiary of Tesco, is to begin trialling a franchise model with independent retailers
  • Morrisons is opening its first M Local stores (see our recent store visit) and is planning to have 100 M local convenience stores open by January 2014, primarily in London
  • Asda is committed to building a world class multi-channel business. Since its acquisition of Netto's UK business, Asda has been learning how to get the most out of its expanding portfolio of small format stores - stores are now organised to meet the needs of convenience, 'top-up' and 'stock-up' shoppers

Symbol operators currently account for over 40% of convenience sales, significantly more than other segments. The steady stream of independent retailers joining symbol groups combined with development of the product range and more consistent format has fuelled sales growth of 8.4% for symbol stores.

Key drivers for convenience store growth

There are a number of reasons why shoppers’ changing habits are contributing to convenience channel growth. Our ShopperVista research shows that they are shopping little and often, visiting smaller, local grocery stores more than 11 times a month. Convenience stores are helping the increasing number of smaller households, who do not need to plan their meals.

Many time pressed shoppers, particularly the increasing number of part-time workers, are using convenience stores to top-up on products they may have run out of or had forgotten to buy during a main shop.

The economic environment has had an impact too - for a number of shoppers, shopping at local grocery stores helps to offset any rises in fuel prices and is an aid to budgeting.

Convenience stores and food manufacturers can appeal to these shoppers by better communicating how their products represent value for money. That could be through enhancing private label ranges, innovative in-store design or merchandising and targeted promotions to broaden the customer base.

For the longer term, many convenience store operators could reap benefits from a clear strategy for online and digital development and local community engagement.

2. Tailor product ranges to the profile of local shoppers

Improvements to the quality of the stores and the shopping experience are helping to broaden the convenience sector’s appeal. Rather than offering the same thing to everybody, convenience operators are increasingly tailoring their stores and products depending on local demographics and shopper missions.

For example, Costcutter’s new KwikSave fascia was reintroduced last year into lower income catchment areas. The symbol group operator also targets more affluent areas with the more premium myCostcutter format. Nisa also has its new Loco format to provide quality convenience stores that play an active role within the local community.

It is becoming increasingly important to adapt category and product solutions to meet the needs of shopper profiles; our latest ShopperVista research shows that there are pronounced differences in the demographic profile by convenience store segment.

Shoppers at multiple-format and forecourt retailers are more likely to be younger and from higher social groups. In contrast, independent and co-operative shoppers are more likely to be older, not working and from a less affluent socio-demographic group.

3. Cater for a wider range of shopper ‘missions’

The top 10 shopping missions at convenience stores

Source: ShopperVista; all shoppers using a convenience store in the last month

In the future, it will become even more important for retailers to differentiate themselves by developing a range of solutions to meet different shopper ‘missions’.

Topping-up on staple products such as bread, milk and eggs remains the main shopping mission for convenience shoppers. However, at least 17 missions were identified overall. Shoppers we spoke to had been encouraged to visit convenience stores for follow-up trips to buy more groceries by merchandising that stood out and promotions that offered good value for money.

Our research found that there’s an opportunity for retailers to encourage shoppers to come to their convenience stores more frequently by catering for more shopper missions - that could be picking up something for breakfast on the way to work, grabbing a self-service coffee or popping in on the way home to buy an evening meal, for example.

Convenience stores also benefit from keeping a close eye on emerging trends. Some convenience stores are making the most of their convenient locations by offering Amazon lockers for online shoppers’ deliveries, for example, while others are providing pick-up locations for parcel deliveries. This provides busy shoppers the chance to use the large convenience store network to make their everyday tasks easier to manage.

Our research has shown half of convenience store shoppers are interested in parcel pick-up like this one at the Spar store in Coventry.

It’s going to become increasingly important to build loyalty by helping to broaden the number of shopper missions and encouraging impulse shopping alongside Amazon lockers like this.

Seizing the opportunity

The convenience sector is becoming more complex, with more differentiation, innovation and new store formats. To share in the growth, your business will need to be fully aware of the strengths and direction of each of the convenience segments – such as multiple-format retailers, symbol groups and co-operatives - and the profile and needs of their local shoppers.

By planning and allocating more resources to understanding convenience shoppers, retailers and manufacturers can benefit from the opportunity to tap into a growing channel and target new shopper groups.

New service added

IGD has long-established insight programmes on convenience, retail and online grocery retailing. Today I’m delighted to unveil that we are taking our shopper programmes in these areas to a whole new level with the launch of ShopperVista Channel Focus. It will provide insights to enable you to:

  • Be at the forefront of channel-specific shopper requirements
  • Develop and adapt your channel plans in-line with shopper expectations
  • Optimise shopper communication by understanding the key triggers in each channel
  • Innovate with channel-specific ranging, promotion and communication plans
  • Build multichannel capability across your organisation by integrating our channel insights into your reporting

To enable this, IGD has created three brand new channel-specific shopper tracking studies. Each quarter we’re talking to a nationally representative sample of 1,000 shoppers of each high growth channel:

  1. Convenience store shoppers
  2. Online grocery shoppers
  3. Discount store shoppers, alternating each quarter between High Street and Grocery discount chains

Every day, we'll be talking to shoppers within each channel to understand who they are and how frequently they use the channel, what their shopping missions and motivators are, and levels of satisfaction and areas for development across a range of commercial topics, including value, quality, private label and promotions.

  • Every month Channel Focus subscribers will receive an insight report of the latest findings and a PowerPoint deck of the tacking research over the previous quarter for one channel. We’re covering each once per month
  • We’ll be providing practical, actionable and forward-looking insights and implications, utilising the same tracking research best practice developed across the ShopperVista service
  • We’re not replicating or replacing any research that is currently part of the current ShopperVista service. These are new, more in-depth insights

The first insights, covering the Convenience channel, are available now. Visit the Convenience channel page here.