Skip to main content

Local sales in growth but beware the predators

Demographics suggest that as people get older and as households get smaller, then local convenience stores will prove more attractive for more shoppers. On the surface this is good news for local shops but don’t kid yourself that the multiple grocers have not got designs on this sector.

Authoritative figures from the Institute of Grocery Distribution released earlier this month show that the convenience market is growing faster than the grocery market, up 6.3 per cent in the past year to £30.9 billion. Better news, the IGD says it will grow strongly over the next five years to £41.2bn in 2015.

A good market to be in. Yes, says Tesco, which is adding 521,000 square feet of selling space in the convenience channel this year in 213 locations and expecting to grab just under £640 million of extra sales. With Waitrose and Sainsbury also active in providing “convenience options”, how much of this £10 billion growth in the next five years will be available to you?

That depends on how serious you are about winning local business. At the NFRN conference earlier this month both Charles Wilson of Booker and Neil Jagger of Mail Newspapers highlighted the inroads that the multiples are making into the tobacco and newspaper markets.

These are two sectors where independents have traditionally enjoyed a local edge and benefitted from the extra sales that come with most packets of cigarettes or newspapers sold. While Tesco, for example, is not set up to compete directly with independent c-stores or CTNs and a big slice of its revenues come from top up shopping of fresh and chilled products, its Express format stores are still keen to attract as many local people as possible.

At a simple level, its managers know that the more people they can attract in store and the longer they can keep them in store, the greater their sales will be.

The good news in the IGD figures is that that symbol group retailers took 60% of the extra sales in the past year, worth around £1bn. The multiples took a 22.5% share worth £413m.  However they did this, on the IGD figures, by adding just 40 stores (compared to more than 1,000 new symbol group stores).

To remain successful you need to do your homework, which means working out the potential customer base in your local area and what market share you currently have.  For example, if you have 5,000 adults living locally and you are selling 500 newspapers a day that is a 10 per cent share. Similarly, with tobacco sales you can assume that 20 per cent of the 5,000 are smokers and selling 100 packets of cigarettes a day gives you a 10 per cent share.

If Tesco needs £75000 a week to make an Express work, then it needs to get 50 per cent of the 5,000 spending £30 – or three visits at £10. Every £10 visit you keep makes its job harder.

Comments

Popular posts from this blog

Three secrets of great merchandising

Look at the ceiling and top wall of this McDonalds restaurant. There is a picture of two good looking healthy people having fun and some bright primary colours. Ask yourself what is the purpose of this picture? In the latest issue of Retail Newsagent in a feature on merchandising, Andrew Knight of RI tells its independent readers that they need to think about using sharp pictures of non-packaged products linked to people consuming goods. Perhaps this has been taken to the next level by the fast food chain - that is selling the feeling of being happy and healthy rather than the products. A second, related tip from the same feature is made by most contributors - it is vital to keep windows clean and clear of clutter. "I believe that less is more," says Roli Ranger, a retailer from Ascot, Berkshire. He has posters for promotions in between the windows that are regularly updated and discreet signs in the windows. Third, a highly visible well-stocked promotion at the entranc

Overcoming a price disadvantage

Planning for his speech at the Independent Achievers Academy last week, Theo Paphitis asked an assistant to buy a basket of six essentials from a Tesco, a Londis (independent operator in a symbol group) and a One Stop (Tesco's CTN/convenience chain). Tesco was cheapest by a big margin. Second came Londis. The most expensive was One Stop. Mr Paphitis understands the power of the supermarkets and he says the way to counter them is to focus on how to make the experience of shopping with you more relevant to shoppers or more enjoyable for them. John Heynan, sales director of Molson Coors, told Retail Newsagent at about the same time that occasional beer buyers will pay 13 per cent more for their beer in an independent convenience store, provided the retailer targets them appropriately. Tesco has carved itself out this 13 per cent head start. Looking at pricing, if Tesco is 100, then Tesco Express is 108, One Stop is 112, a good symbol group is 115 and non-affiliated independents

A sign of retail stress perhaps

It must have been four months since this window was broken in the Tesco Express on Pentonville Road and I simply cannot believe that it has not been fixed. This is the sort of lack of focus that independent shops usually get criticised for. The only purpose in sharing this image is to encourage those independents with high standards who are finding the going tough that they can do better than this.