The convenience battle field

The new Little Waitrose in Shrewsbury

The John Lewis Partnership has parked this Little Waitrose convenience store, which opened last Thursday, just across the road from Marks & Spencer in the centre of Shrewsbury.

On the one hand, this shows that the big retailers in town centres are thinking about competing head-to-head and they assume that their competitors have sites with the best footfall. This may be helpful for independent retailers as they are left unscathed in areas where footfall does not meet the multiples' requirement.

On the other, it shows that the big retailers are deadly serious about competing for a bigger stake of the convenience market. Their intent grows. Justin King, head of Sainsbury, has announced that he will take responsibility for its convenience business, which will be one of the areas where it will grow strongly in the future.

Mr King told the City last week that consumers were "managing their household budgets wisely and well" and this fits with its successful marketing strategy - such as Feed your family for a week for £50 - that demonstrate its strengths of affordability, freshness, quality and ingredients. However, as it makes 35p for every £10 of sales - compared to 55p for Morrisons and 63p for Tesco - independent retailers can see that the costs of investing in quality space and products might generate very slim returns.

Also announced earlier this month, Dalton Philips of Morrisons said opening hours would extend at most of its 440 stores which would now stay open until 9pm or 10pm. This is clearly aimed at tapping into the convenience shopper who choses to use a supermarket in the evening. Talking to one northern c-store owner last week, we agreed that we were surprised that any major grocer still closed at 7pm. Some low hanging fruit for Mr Philips, clearly.

Again, in its internal forecasts, Morrisons suggests that the longer opening hours will cover costs and perhaps do a little better. Like Sainsbury, its move into convenience is not assumed to be offering better margins.

This demonstrates that the market is already very competitive, which many local store operators will already know. The good news is that independent retailers backed by good wholesalers are achieving good returns and sales growth. The bad news is that the multiples will continue to invest time and money in competing for the convenience shopper, which means local shops are going to have to work hard and long to stay ahead. The good news is that so many are still staying ahead.

But it would be wise to benchmark your operating profit against that of the supermarkets. Remember that their numbers are an integrated figure for both wholesale and retail. You will be sharing profit with a wholesale supplier.

Looking ahead, Charlie Mayfield, who heads the John Lewis Partnership, says that it is going to be "a long period of slow, stuttering growth punctuated by confidence moving up and down in response to events. Very different from the past 10 years when we've enjoyed sustained increase in consumption."

The shopper is not going to rescue anyone by spending more.

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...

Busy street, empty shop, missed profits

True in part to my New Year resolution, I held a business meeting in an independent coffee shop today just next door to a Starbucks. The cafe was presented well and four staff were busy preparing for the lunchtime rush, at 11am. As my guests were late, I had a half hour overview of footfall on the street outside and in the restaurant. Six customers. Barely enough to form the queue in Starbucks or Pret-a-Manger just down the road. Plus one Italian girl who dropped off her CV. Some people stopped to look at the posters in the window and moved on. The owners seemed quite happy. When I left just after 1215, they were doing brisk trade. However, I have the impression that the business is not working hard enough. It could easily have managed 120 customers between 11 and 12, instead of 12. This is lost profit as the fixed overheads and staff costs are already in place. The owners are clearly busy - perhaps too busy to take time to look at the potential that their cafe has. What shou...

Sticks and stones do hurt

My 17 year-old son returned from a rock festival this week wearing a wristband proudly declaring him 0ver 18. He explained how easy it had been to use someone else's ID to get the identification and said it was ironic that he had not needed to show the over 18 band when buying alcohol. Today, Scottish retailer Abdul Qadar is complaining that public authorities are asking people to lie about their age when making test purchases. What trading standards officers may be forgetting is that the fact that retailers invest in a business premises and trade consistently from it make their job much, much easier. The alternative, a world of markets and itinerant traders, will be far harder to police. Mr Qadar's sense of injustice is fair. Those retailers, like Mr Qadar, who value their investment will seek to trade legally and will not sell alcohol to people under the age of 18. Asking children to lie about their age to local traders is a slander on all retailers.

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