Small Stores Rise Again

What goes around comes around.

How true that is for small stores. Having reached endangered species status the wheels have turned and now buying food in small local stores, usually styled “convenience” or C-store shopping, is forecast to be one of the fastest growing sectors of the market. IGD (Institute of Grocery Distribution) says that the convenience sector will grow by over £10bn to reach £46.2bn by 2018.

Consumers are buying more food locally to cut down on fuel costs, to help budgeting because they are less tempted to spend on stuff they either don’t need or which is likely to have passed its sell by date before they get round to eating the product, and to save time. According to IGD 85% of consumers visited a convenience store in the last month, and in August 2013, 9% of people did their main shop at a convenience store.

All the big retailers have jumped on the bandwagon. Even Aldi who have hitherto resolutely stated that they will focus only on on their traditional supermarkets, are trialling a convenience store in West London.

It is not just the big supermarkets who are developing strategies for convenience stores. Costcutter offers 3 different models of small store shopping – good, better and best – and shop owners can choose the model which best suits their local customers.

The keys to successful convenience store management start as ever with the needs of the shopper. In the past these needs may have been limited to topping up on staples like bread, milk and eggs, and buying a daily paper, bar of chocolate or cigarettes. The game is changing now, and whilst many will still visit the store for these items, shoppers say that they would like more fresh food counters, fresh food available at the front of the store, and fresh food grouped together.

Fresh and local is a powerful selling message. Smaller stores whose customers like the idea of supporting their local farmer or grower can grasp an edge over the bigger players by stocking local goods and displaying them with a strong message about the individuals who produce the food.

The knowledge that small store operators can develop about their customers, many of whom are regulars, means that they can tailor their offer specifically for them. An example quoted by IGD is that a store sited near to a railway station could offer food for commuters to eat on their journey to work, and ensure that they have ingredients available so that those same travellers on the way home can buy all that is necessary to prepare an evening meal.

There will be many other entrepreneurial ideas that smaller retailers can embrace and profit from. The very good news is that shoppers are looking for first class convenience stores and will support those who cater for what they want.

The Sainsbury Take on What makes Consumers Tick

Sainsbury’s half year results were announced this week and showed good growth in sales and profits. The company has now increased its sales for 35 quarters in a row, something that none of the other “big four” players have done and so when CEO Justin King speaks about what consumers want it is worth a listen.

 When presenting the results King said that the better economic mood in the country has yet to be felt by consumers in their pockets and so Sainsbury’s business plan assumes that household incomes will remain flat to declining over the next two to three years.

Equally striking is his overwhelming belief that, despite the economic pressure, British consumers are driven as much by ethical values as by price. He sincerely believes that Sainsbury’s success can be put down to fairness in dealing with suppliers, high standards of food quality and traceability, (interestingly Sainsbury was not tainted by the horsemeat scandal), and attention to animal welfare, (where they have for years supported RSPCA Freedom Foods, Fair Trade bananas, free range eggs, and Marine stewardship Council fish).

King is convinced that British consumers stand right behind him on this. Which explains why, despite being knocked back twice in the challenge on Tesco’s price promise, Sainsbury are again going to the courts to claim that when comparing prices, issues such as animal welfare and Fair Trade have to be taken into the equation. 84% of consumers apparently agree with him.

According to King this commitment to values applies to supplier relationships. Speaking on the day when Prince Charles took a swipe at rapacious retailers who deal unfairly with farmers, King stated categorically that Sainsbury’s supplier relationships are totally fair.

The commitment to ethical values is an overarching strategy, and it is accompanied by a commitment to financial value in the shape of Brand Match, the scheme whereby consumers get a coupon if their branded purchase would have cost less in one of the other big four retailers. Beyond this, the Sainsbury route to winning consumer spend lies in investment in convenience stores, online shopping, and Sainsbury’s own brand where of course they can display their values credentials to best effect. In the last 6 months sales through convenience stores have grown by 20%, online by 15% and sales of mid range By Sainsbury and Taste the Difference food brands are growing at twice the rate of national brands. They will continue to invest in their Nectar card which they believe allows tailor made promotional activity directed at individual shoppers and is thus more relevant than competitors who use loyalty cards to promote to groups of people.

Cynics might say that there is no such thing as a major retailer who is fair to suppliers. Cynics might also say that it is price alone that matters to consumers and Sainsbury just happen to be on a winning streak because Tesco, Morrisons and ASDA are going through a difficult time.

But, 34 consecutive quarters of growth mean that Sainsbury must be doing something right – something that resonates with consumers sufficiently strongly to make them shop there on as regular basis.

Click and Collect – A Way of Online Shopping that Works for Customers and Retailers

Click and Collect , the system whereby  the customer orders on line but collects from the store, seems to be gaining popularity with shoppers and retailers alike.

It is attractive to retailers because it avoids what is probably the most costly part of online grocery selling - no spending is needed on maintaining a fleet of vans, recruiting  staff to fill and drive the vans, tax, insurance, and ever escalating fuel costs.

 

Customers like click and collect because it is convenient - no waiting indoors for the shopping to arrive. Instead they can swing by the chosen pick up point at a time to suit them.

And so we see ASDA setting up Click and Collect in 300 of its stores, and Tesco trialling pickup points in car parks and schools.

There are though a few facts worth bearing in mind before rushing to invest in click and collect.

First, it is still a tiny fraction of the total grocery market. Online in total as a way of buying groceries is only projected to be around 7% of the market by 2018. Within that, 18% of shoppers claimed to have used click and collect in the last month, but, just 4% of online shoppers claimed to use only click and collect. (Institute of Grocery Distribution)

Secondly, having a click and collect facility does not guarantee loyalty. Click and collect shoppers have used at least three different retailers to shop with online in the last month, compared with two for the average online shopper. They are not wedded to click and collect, or even online, and regularly shop across different channels meaning that they are prepared to  buy from discounters like Aldi, or convenience shops, or conventional supermarkets.

On the other hand, Click and Collectors are attractive customers for retailers to win. They tend to be affluent, and be working parents with children still at home, so they are relatively heavy spenders. They are technologically inclined. 61% have a tablet computer versus 41% for online shoppers using home delivery, and 90% have a smartphone versus 74% for home delivery. This means that it is easy to contact them and send relevant promotional messages.

It is this high spending potential that retailers are chasing, and they are mindful that if captured it is likely to be a more profitable business model than standard home delivery.

According to IGD, click and collect as a way of shopping is showing “unprecedented growth”, and they are increasing their forecasts of how big it could end up being.