Convenience in Ireland has always been popular with Irish consumers, maybe it’s due to our past and the link with the ‘corner shop’ or maybe it’s due to the vast array of very well developed convenience formats in Ireland, either way its here to stay and back in growth. As with other channels the big players are getting bigger and expanding (Leading operators like Centra and Spar continue to add new stores to their networks, the forecourt channel also continues to expand and develop new convenience store formats, the fact they also sell petrol is now almost a by-product of their offer! This growth is great for convenience stores, but is seemingly a bit of a headache for Irish manufacturers and suppliers who now have to negotiate with even larger retailer and wholesale groups.
There was a time when the multiples were the only ones giving suppliers headaches. Multiples have immense muscle when it comes to the listing process, which they often use to gain the upper hand in negotiations with suppliers. Both manufacturers and suppliers are continually squeezed for margin, but if they weren't in these stores, they didn't stand a chance of succeeding in a very competitive environment. Fast forward to today, and the same is true for large convenience store chains, with the market consolidating the major players have hundreds of stores and with that scale comes enormous power.
The changing face of convenience & the balance of power between retailer & supplier
There was also a time when the convenience channel was dismissed or at least not prioritised by major manufacturers & suppliers (in some cases it still isn't prioritised), it was inconsistent with regard to product availability, product selection and was difficult to maintain existing listings, as stores were continually changing, mainly due to persuasive direct supply local suppliers that may have provided a merchandising service which often led to changes to facings, range or space on shelf,
pushing out or squeezing brands that were not their own. But nowadays convenience retailers are very much in control of their space and ensure that their stores are following a strict set of head office planograms or range agreements. This has resulted in greater buying power for the group but meant that it is now more difficult to get listings without first been approved by head office! Now retailers can make a real difference to the bottom line of suppliers & manufacturers lucky enough to feature in their stores.
Post recession Irish consumers have changed the way they shop
With the recession all but over now Irish consumers have changed their grocery shopping habits, low prices are no longer the main driver but convenience is!, consumers are now shopping more frequently and in more retail outlets, the impact has resulted in increases in local store visits and an increase in the number of visits to convenience stores in general. The variety of shopper missions that convenience stores are now attracting is huge, breakfast replacement, lunchtime need, top-up, meal for tonight, late night fix, tobacco & newspapers and so on. It's no longer the case where you can easily classify convenience shoppers into a particular set of consumers, it has once again become part many consumers needs, appealing to the biggest need ‘convenience’ its local, easy to access and well supplied with its fair share of promotions and good value. The prominence of social media marketing has also made a big impact where followers on twitter and facebook are quickly made aware of in store promotions which they can quickly access by popping down to their local store to pick up the promotion.
So how should suppliers ensure that they can benefit from this growth opportunity?
The costs of entry into convenience stores will no doubt go up but for good reason: there are more products competing for limited space. While you may be able to justify many SKUs in a multiple, that is probably not the case in a convenience store. Before considering that you want the same product in all of the stores consider that not all stores are equal. Different stores serve different needs. Some stores are food-to-go and lunchtime based, some are motorway or long distance commuters, some are top up grocery shops for the neighbourhood, some near schools or colleges focus on students. Understand which shopper you are targeting and which sub-set of convenience stores to focus on, then focus your investments on stores where you are most likely to get a meaningful return. If possible ensure you have some control over your listings by store format rather then store group, this will ensure you have the highest possible chance of matching your range to the consumer need.
You must assess your brand portfolio; brand by brand, product by product, against the needs and missions of the convenience store shopper. Only if your brand delivers enough value to the shopper, the retailer, and of course you, should it be proposed for listing.
Target promotions wisely
As with the multiple channel, there may be an over reliance on promotions in convenience. While manufacturers may feel obliged to support their retailer’s promotional programs, understanding how best to optimize this investment is key. Think about who you are targeting, is this the right brand or sub category that matches the specific consumer need? Think about who the target shoppers are and tailor your activities to match their needs as this can deliver significantly better returns. Think about running promotions by store format rather than by total group, where possible match your range to what appeals to a specific consumer need i.e. top grocery won’t appeal to commuters or food-to-go site types but soft drinks and confectionery may do extremely well.
Convenience stores are likely to grow in the future. Plan wisely and invest your resources in better understanding the consumer’s habits in this channel.
Remember to share your insights with the retailers as this will ensure you are better rated in the retailers mind and more likely to gain influence with them. Ensure your investments can be scaled up as the channel expands or retailer brands consolidate. Consider that you don’t need to be in every store but in stores that match your brand portfolio, or you may consider having a portfolio that matches each consumer need.
After spending much of my own career in convenience retailing I have witnessed many of these changes and in my own small way helped influence some! It was no easy task to introduce new categories into the business and indeed not all ended up being introduced, but both Statoil and Topaz went on to be format influencers in the channel so I must have done something right! I have learned that in order to survive in convenience, you must fully understand your customers needs or habits and innovate or shape your business around them, as long as you continue to innovate and adjust your strategies to match the likelihood is that you will be successful!
Anyway thats my view.......
Gerry Byrne is the owner of shelfstock a company that specializes in everything to do with consumer insights, store planograms and category management. Please feel free to get in touch for more information on any of these topics