The Future Of The Convenience Market
• September 2014
The Future Of The Convenience Channel
Amanda Jones, Conviviality Retail, Chief Operating Officer
June 2015
My journey to convenience retailing.....
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Conviviality...Our business
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The UK’s largest off-licence and convenience chain with over 600 stores
We have 400 Franchisees
Our stores are at the heart of communities serving mainly C2,D,E shoppers
We are a discounter........ we price over 12% lower than thebig 4 supermarkets
We are well placed to capture share from the growing Convenience market
Our aim is to be the best value off licence led convenience store in the eyes of our customers, employees and Franchisees
We specialise with our unique point of difference in the Convenience Market
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Destination value led off licence with tobacco, impulsecrisps snacks and confectionary
Destination off licence led Convenience store servinglocal community needs
Wine and Sprits Specialist providing excellent rangeand service for customers wanting range beyond the supermarket offering
Destination volume based mission,full range and choice. Pricing targeted towards better value case deals and offers
The UK Grocery Market is undergoing unprecedented change
As UK enters deflation,
Asda boss Andy Clarke
calls 2015 supermarkets‘
"most challenging year yet"
Grocery price falls hurting UK supermarkets
Lower prices have taken £532m
out of supermarket tills, Kantar Worldpanel
says
Aldi, Lidl and Waitrose are only food retailers
growing sales Latest industry sales figures
underline pressure on "big four" supermarkets
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Convenience, Online and Discount to grow fastest
Price is increasingly important in determining where to shop, but Location remains the primary reason for store choice.
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Customers are in fact slow to change their shopping habits, with better prices and moving home being the main drivers for change
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The changing face of convenience stores...
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FROM THIS… TO THIS…
FROM THIS… TO THIS…
Major Supermarkets have changed the Convenience channel for the better
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Consumers changing needs favour the convenience channel
10Source: Kantar Retail 2014, ONS 2014, Eurostat 2014
Retailers are developing new formats that cross traditional channel boundaries
• ‘blurring’ of channels is occurring as retailers think differently about convenience
• The newest development is a hybrid format that bridges the divide between discount & convenience
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Symbols account for 42% of the channel - and growing at +5%
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Note: YoY growth figures given as actual growth not % share
Source: IGD & WRBM 2014
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Symbols have grown consistently ahead of the channel for 10years
• Symbol groups represent the largest share – more than
double that of Convenience Multiples
• They are developing their offers to meet specific shopper
missions, particularly around fresh and quality
• Shopper satisfaction ratings have improved year after
year after year
• Retailers benefit from a branded shop fascia
• IT and logistics support
• Marketing and promotions
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• A Symbol retailer includes independents that are affiliated to a symbol, fascia or franchise
group and typically, purchase a proportion of the goods from their respective symbol group
Who is the Convenience shopper today?
14Source: ACS, HIM 2014
Local is increasingly important
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A demand for better pricing will continue
• Shoppers are less tolerant of premium pricing in convenience - up to 11% premium on
supermarket prices is acceptable
• Convenience stores need to show VFM - promotions are becoming an expectation
• Bargain Booze pricing is on average 12% cheaper than the multiples
16Source: HIM, IGD 2014
Fresh food and good store standards are an expectation
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Shoppers rate Symbol retailers higher than Independents or Multiples
18Source: ACS, HIM 2014
We are Learning from the Best in Class from Around the World
Best in class from around the world can be grouped into three distinct convenience models
Fresh & Meal Solutions:
• Pioneered in Western Europe
• Fresh is a hero category
• Offers inspiration and solutions
Food To Go:
• Driven by forecourt operators
• Targeted at food-for-now
• Limited focus on wider shopper needs
Impulse:
• Highly populated Asian markets
• About the here and now
• Offer changes by time of day
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Hong Kong, 7-eleven Hot Food To Go & Services
A hot food counter offers local
delicacies which are available as
part of meal solutions which
change throughout the day. Due
to the nature of the store, and the
focus on impulse purchases, a
strong food-to-go offer is essential
to compete with specialist
foodservice operators such as
Starbucks
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The store offers additional
services to shoppers which
includes; free wi-fi, transport card
top-up, mobile phone top-up, mobile
charging, pre-paid Alipay (third party
payment solution), ITunes cards and
bill payments. All these services
are immediate – offering
customers solutions to problems
in real time
The Convenience market is expected to reach £49bn by 2019
• Over the next 5 years, sales through Superstores and Hypermarkets will decline by £3bn
• …Convenience will take almost a quarter of the market by 2019 – worth £49bn (+30%) as shoppers
increasingly prefer to shop locally
• Symbol retailers are well positioned to deliver against the growing trends
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By 2019,
Convenience will
account for 24p in
every £1 spent on
food & grocery
CAGR
5.5%
Source: IGD & ACS 2014
37.4
49.0
05
101520253035404550
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e 2016e 2017e 2018e 2019e
Sale
s (£
bn
)
There are 5 key areas to compete in our market...
Great store standards
Range and services that customers want
Emphasis on community
Deliver consistently good value
Excellent Customer Service
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How will Convenience retailing develop?
Combining Functional & Emotional:
Use of Digital and Social Media
Click & Collect, Apps, Services
Discount ranges
Longer opening hours
Meet the Food Service missions
Become the community hub for goods and
services
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“Creativity is one of the last remaining
legal ways of gaining an unfair advantage
over the competition.”
Ed McCabe