The future is bright, the future is convenience, and there is significant growth out there, delegates were told at last month’s IGD Convenience Retailing conference in London.

"However, the inconvenient truth is that as an industry we are facing huge milestones," said Tristram Wilkinson, VP/managing director UK & Ireland, Kimberley-Clark, in the opening presentation.

"A few months ago a Kantar report revealed that for the first time in its history, a basket of goods was worth the same as it had been the year before. More recent data revealed that a basket of goods was worth less than a year ago. In an industry which has benefited from underlying inflation over the decades, we are seeing a real structural change due to the fierce competition across the grocery industry."

While it’s great for shoppers that prices are flat and in some cases down, Wilkinson said there had not been the expected volume growth: "Unit volumes are consistently down, because consumer behaviour has fundamentally changed.

"But the convenient truth is that there is loads of growth out there, and it’s all underpinned by the same thing convenience. IGD forecast that in the next five or six years the combination of online, discount and convenience retailing will be worth 43% of all planned sales in our industry. It’s all underpinned by convenience. Convenience in the way we pay paypal, contactless, google wallet; convenience in the way we shop on the way home, nearer to home than the high street, in the home, click and collect. These are all fundamentally more convenient ways to shop than in the past."

He said the growth in convenience was here to stay because it is underpinned by macro economic trends and macro consumer behaviour trends. He cited single-person households as an example.

"More than a quarter of new house-builds over the next decade will be single-occupancy dwellings. Half of all new houses built in the next decade will be led by household members of over 65 years old. So we have an ageing demographic, and a trend for smaller households and smaller basket sizes.

"We also have smaller living spaces over 80% of the UK population lives in cities today, and that is only set to grow, so storage is an issue. Technology is a big enabler for convenience and will continue to be so.

"Big consumer trends are here to stay. That means we have more people shopping more often. Even more exciting to me, while we all talk about the larger trends for smaller basket sizes, the reality is that within convenience basket sizes, if anything, we are starting to show a trend to increase. We’ve seen a reduction in the frequency of small basket sizes, and an increase in the size of slightly larger top-up shops. This is where the opportunity lies, seeing the opportunity in every single shopping mission. By focusing on shopper missions we see the opportunities as limitless."

Michael Freedman, IGD’s Shopper Insight Manager, said there was a cyclone hitting the food industry, and that it was coming from the food discounters. "Food sales are down for the first time on record. There has been more change in the past three to six months than in the past 30 years." Significantly 54% of shoppers have been in a discount store in the past month; and 86% of shoppers are extremely or very satisfied with discount stores evidence of the massive change in shopper behaviour.

"But is convenience sheltered from this storm?" he asked.

"We’ve seen increased frequency from the c-store shopper, and IGD is forecasting strong growth for convenience in terms of taking market share, however discounters are encroaching on convenience."

He recommends three priorities to follow the road to growth: deliver excellent value for money; consider private label; and focus on range and missions. Shoppers are concerned about their future finances, so he recommends more round pound deals, and price-marked packs, because of the transparency and perceived better value.

While brands have a big role to play in convenience, he said it was important to recognise the role played by private label.

He also recommended inspiring customers to have more ’missions’ by ’zoning’; for example an impressive bakery display; bringing items together to create ideas for an evening meal.

"Is there more that can be done to bring your products out to tempt the shopper?"

Klaas Mantel, general manager, global convenience retail and lubricants, Shell International, said many Shell forecourt sites in Europe already had more convenience retail transactions than fuel transactions. "So convenience is the biggest opportunity for us.

"Our strategy is to strengthen our core convenience offer, with a contemporary format, focusing on fresh and coffee; as well as strategic partnerships with convenience suppliers.

"We also focus on partnerships to enhance our offer, such as food and coffee franchises; on the move services and grocery."

He said the convenience retail channel was growing globally, but was not as convenient as consumers wanted it to be, with 95% demanding convenience, but many not believing they’re getting it. He said there were new perceptions of convenience, with not just speed, but an enjoyable shopping experience, being key factors.

"We have to meet consumer needs in five minutes or less. But we must also consider humanised customer service; ease of payment; a seamless omni-channel experience; and partnerships."

He said Shell was calling on retailers and consumers to work together to close the convenience gap.

Nikki Rogers, BP’s UK trading director, said for the past three years the company had focused on a strategy which "starts and ends with the customer". A review of the company’s partnership format with M&S which was first rolled out in 2007 and is targeted to be installed on up to 350 BP forecourts revealed a seismic change in the customer profile of those sites, which attract a mostly female, more affluent audience. Another revelation when a site moved to include the M&S offer, was that there was an uplift in sales of everything, except Wild Bean. "That’s when we knew it was in need of an upgrade," she said.

It has since been relaunched with a new look, and a new coffee menu board, with a range of initiatives to drive sales.

She also spoke about next April’s tobacco display ban, saying the company regarded it as an opportunity rather than a threat, teasing the audience with two options the company has considered for rolling out next year, to make the most of the area behind the till, once tobacco products can no longer be displayed there.

huge convenience opportunities

Significant growth opportunities lie ahead for convenience stores, which are now visited on average 12 times a month more often than any other type of grocery format.
These are the findings from a study by IGD, the research and training charity for the food and consumer goods industry.
Its ShopperVista research found that half of shoppers now believe that it’s more convenient to shop around rather than buy everything under one roof, with the average shopper making 24 grocery trips a month through four different channels. Today’s shoppers have three main priorities:
To save money on food and groceries (64%)
To reduce food waste (47%)
To stick to a budget (47%)
Convenience is already the second-largest grocery channel and by 2019, IGD forecasts it will account for nearly a quarter (24%) of food and grocery sales. Together, convenience, discount and online retailing are expected to grow by more than £31bn over the next five years and claim 43% of the market.
Joanne Denney-Finch, IGD chief executive, said: "Shoppers now expect grocery retailing to organise itself around their lives, rather than building their routines around store opening hours. We now see shoppers finding it more convenient to use a number of different channels to meet their needs despite the extra travel and checkout time required.
"Convenience isn’t always about time it’s also about effort. Shoppers often want to plan their meals just a few days ahead, or even on the day itself. They also find it convenient just to spend 10 minutes shopping on their way home from work, even if that means they are shopping more frequently.
"The fundamental shifts in shopper behaviour we have seen in recent years indicate that whether you’re a retailer or a supplier, there is a huge opportunity in the convenience channel."
The research unveiled some key improvements that convenience shoppers would like to see on pricing and promotions:
42% said they favour price reductions over multi-buys in the channel
41% would like to see convenience stores provide more round pound deals and pound zones
37% want it to be easier to compare offers with the original price
Denney-Finch added: "To help make the most of the growth opportunities ahead, retailers and suppliers in the channel should balance shoppers’ requests on pricing with promotions to offer more clarity and transparency.
"It is those convenience operators who stay closest to shoppers’ changing needs that will be best equipped to drive the channel’s opportunity for growth."