As widely reported, the pandemic has given a major boost to the convenience store sector with sales now expected to grow by almost 8% in 2020 compared to the 3% achieved last year.
Research by Mintel states that the significant increase in food and drink consumption at home over recent months will result in the convenience store market growing from £44.1bn in 2019 to an estimated £47.5bn in 2020. This is despite the hit to ‘on-the-go’ trade such as breakfast and lunch items. This rate of growth is outperforming the wider grocery sector, which is expected to grow by around 6% in 2020.
While people flocked to local stores during lockdown, such a peak in demand is not expected to continue into 2021, particularly if social distancing measures continue to be relaxed and consumer budgets are squeezed further. Mintel estimates a decline of 3.9% in the market in 2021, as it rebalances before reaching more consistent lower growth through to 2024 (of 2-3%) when the market is forecast to reach £49bn.
Nick Carroll, Associate Director of Retail Research, said: “The shift to localised shopping during the peak of COVID-19 has benefited the convenience sector, driving larger-basket demand and sales as consumers necessarily shopped more in their local communities. Longer term, the importance of convenience stores within these communities and consumers’ desire to support them will only be reinforced – providing a solid platform for convenience retailers to build upon.”
“Not all aspects of the sector, however, are benefiting. On-the-go food and drink, for example, is a significant part of convenience trade and has naturally been constricted by lower levels of public movement and more working at home since the lockdown. In particular, this has impacted convenience stores in travel hubs. However, this decline in sales has been offset by more spending on in-home food and drink as shoppers look to shop closer to home.”
Meanwhile, Mintel’s research found that some 80% of convenience store shoppers agree convenience stores provide essential services to neighbourhoods. However, tapping into the community spirit requires a two-way relationship – as over half (54%) of shoppers agree that it is important that convenience stores give back to the local community.
This comes after Mintel found that there is a growing number of people wanting to support neighbourhood businesses. A quarter (25%) of consumers say they are now shopping more with local businesses due to COVID-19.
Carroll said: “It is encouraging for the sector that providing essential services to the community is widely held by today’s shoppers – this is what convenience stores are all about. A major long term positive of the crisis will be how the ‘essential’ status of convenience stores in communities will be reinforced.
“Localism and a more internal looking consumer base was a trend far before COVID-19, but naturally confined to local areas, consumers have become more aware and engaged with their communities. Combined with this is a growing realisation of the need to support small business owners, which much of the symbol operators, such as Nisa or SPAR, fall into.”
NAM Implications:
- Hopefully, proactive NAMs will already be on top of this one…
- …achieving and maintaining their fair share of the convenience action.
