ACNIELSEN INSIGHT

Fast, Fresh and Frequent: The Future of Convenience Retailing
By Mike Watkins, Manager of Retailer Services, ACNielsen and Geraldine Jennings, Business Manager, Retailer Services, ACNielsen

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The most recent data from ACNielsen’s Scantrack shows that the convenience or impulse market already accounts for one third of all food and drink sales in the UK and is expected to grow further in the next few years.  There’s no doubting that the last three years have seen quite a turnaround in the fortunes of convenience retailers.

Just as big hypermarkets and superstores have broken into non-food and extended into financial services and telecommunications for the convenience of their customers, so too are smaller convenience stores driving their own food retail expansion for the very same reasons.  The grocery market has matured as shoppers have changed their shopping habits in line with their lifestyles, with more frequent top-up shops and a bigger demand for faster and fresher produce.   Secondary top-up shopping now supplements larger, less frequent primary out-of-town shopping spends.  And of course, that’s good news for retailers, since the margins are far greater in the convenience sector.

One only needs to look at Marks & Spencer’s Simply Food format, Sainsbury’s Local and Tesco’s Express to see that these large retailers have adapted early to the fact that convenience retailing is one of the few fast-growing areas.  Indeed, the Co-operative Group buying Alldays and Tesco’s buying T&S stores has given them both head-way in this arena.  Spar too, has announced that it’s expanding its convenience stores portfolio with 160 new stores, following its recent deals with A&S Stores, Star News and some independent retailers.  And the most recent data from ACNielsen’s Scantrack shows that the convenience or impulse market already accounts for one third of all food and drink sales in the UK and is expected to grow further in the next few years.

Definitions of “Convenience”

At ACNielsen, where we have looked at shopping behaviour with Homescan Consumer Panel, we believe there are 3 types of modern convenience store:

1.The Forecourt

2.The Traditional convenience store

3.The Multiple convenience store

We see the forecourt store as low basket spends – shoppers with an urgent need of a pint of milk or a loaf of bread or shoppers buying one or two items whilst travelling or stopping for petrol.  Traditional convenience stores include category destination shops such as Newsagents and Off Licences as well as the grocery formats offered by Spar or One Stop; they are location dependent but generally attract impulsive shoppers with medium basket spends.  The final type is the multiple convenience store and the type that we are focusing on in this article.

These multiple convenience stores are attracting shoppers who have planned a top-up shop rather than impulse buyers, perhaps for example if they want a special dinner for that evening.  They want convenient, yet fresh and interesting food-to-go.  This category has a high basket spend and, as we have already established, will become the domain of the supermarket operators who are now driving the pace.  We might automatically think of ABC1 category shoppers for his new kind of convenience shopping, but C2D shoppers are also being attracted to new convenience stores – not only buying ready meals for the family, albeit probably own brands at a cheaper price, but also snacks, pizza and soft drinks.

Fast, Fresh and Frequent – The New Convenience Store Strategy

The new strategy behind convenience retailing is to give customers improved choice, range and brands in areas such as ready-made meals, fresh products, snack ranges, bakery items and wine as well as everyday top-up shopping goods.  And like all convenience stores, they have to open early and close late, if at all, and be easily accessible.  Location is the key.

Arguably, the pioneer of convenience shopping was Spar, with independently owned stores that in its day was one of first to introduce hot food to go.  The same entrepreneurial spirit exists today with the multiple convenience store newcomers; already their shelves are stacked full of fresh local produce, much of it organic, many also have salad bars and rotisseries.  More recently, the success of Marks & Spencer’s Simply Food is a further reflection of the fact that convenience shoppers are now much more sophisticated.  Consumers are keen to buy convenience foods as part of their regular weekly shop; just look at some of the fastest growing categories in multiple grocers in the UK: sales of prepared salads up 32%; chilled ready meals up 19%; frozen ready meals up 15%; Tacos and tortillas up 14%; sandwiches up 15%; chilled pizza up 11%…the list goes on. 

Consumers will buy Convenience Foods as part of their regular weekly shop

See the diagram below for some of the fastest growing categories in Multiple Grocers.

One person who could perhaps be attributed with bringing us this new style of convenience shopping is Jamie Oliver.  He has almost single-handedly taught us how to create food again while demonstrating the convenient, ready-to go-lifestyle proposition of the multiple retailer.  So as consumers, we now look for quick and simple-to-prepare food and a bigger repertoire of new products such as Soya sauce and bean sprouts, and spend more in the process.  Where the original convenience and specialist retailers created and served an original convenience market, the multiples will now develop, strengthen and adapt these to suit the changing demographics and lifestyles of the new shopper. 

At the moment, Marks & Spencer and Sainsbury’s appear to have strong propositions in terms of store size and different formats, with store sizes of between 3,000 and 10,000 sq.ft., while Tesco’s plans to convert the best of the T&S store locations will further extend the reach of their brand.  The Safeway split up or merger is also likely to release some shops for smaller format development although, of course, location will play its part here.  As the average convenience store gets bigger, so they will be able to offer deeper ranges, probably at cheaper prices too, thus lessening the need to visit the high-street ‘specialists’.

Thinking Ahead to a Café Culture

But what of the future?  We have already established that new convenience shoppers have different lifestyles, are demographically diverse and are looking for convenience stores that offer an exciting, different range of foods in accessible locations.  But can retailers predict how shoppers will shop in the next ten years and take the concept of convenience retailing one step further? 

We believe so and the reason is because today’s society is heading even further towards new pastures – fusion foods, food and alcohol on the move, more leisure pursuits.  Take Ahold’s ‘ah to go’ format in The Netherlands.  These are small, self-service stores in high traffic locations.  The shopping experience is all about fun and fulfilment with a focus on good and fresh food-to-go.  It’s ideal for anyone on the move who needs a quick meal solution for immediate consumption or within the next day at home.  And by specifically targeting younger shoppers, this retailer is also looking to extend its brand into the mind-space of a McDonalds consumer.  It’s not unrealistic to see this type of format developing rapidly in cities where this kind of ‘street food’ could be the fast food of the future. 

We’re also heading towards a Café Culture society in the UK and to capitalise on it, the fabric of the convenience retailers will have to change to keep up.  Coffee bars in bookshops have already proved successful; the principle of being able to eat in food retailers is the same.  Indeed, at Waitrose in Canary Wharf, city workers can drop into the champagne and oyster bar before buying their evening or weekend’s meals on their way home from work.  These ‘new age’ shoppers tend to eat out a lot, and when they visit a new style store such as this, their mindset is to be excited by the fresh, fast food experience and to spend more than they initially planned to do.  In much the same vein, some new supermarkets have soft sofas on which to sit and browse magazines; some may even in the future have bistros within the store.  While it may not be the same experience as eating at a local restaurant, the food will be generally as good – and it’s convenient.  The underlying trend we are demonstrating is that shoppers are eating out more and more but when they eat in, they want the same food experience in their own homes.

Of course, while we enjoy the new way of convenience shopping, we cannot forget that we will always still need the basics such as detergents and toiletries.  These, however, will never be top of mind for the modern shopper and hence conform to a different model.  So, it would appear that the days of the traditional supermarket is not the model of the future; we now demand more frequent, fresh fast foods that only the more convenient stores can offer.

For further information, please contact:
Kim Dunkason, ACNielsen Communications on Tel. 01865 732275 or
Email: kim.dunkason@acnielsen.co.uk
www.acnielsen.co.uk

Date article published: 25/02/2003