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- What is a Convenience store?
- Who operates Convenience stores?
- How many Convenience stores are there?
- What is the sector worth and how well is it performing?
- What is happening in the Convenience sector?
- What will the convenience sector look like in the future?
What is a Convenience store?
For a store to be defined as a Convenience store it must satisfy three criteria:
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- Size and Opening hours: The store must be under 3,000 sq ft and open for long hours every day of the week.
- Main Business Activity: All stores must retail food and drink, for consumption off the premises, as their main business activity.
- Product Categories: A group of fifteen products have been identified as being central to the offering of a convenience store. It must sell at least seven of these core products to qualify as a “true” convenience store. The categories are:
- Alcohol
- Bakery
- Chilled food
- Confectionery
- Fast food / Food-to-go
- Frozen food
- Fruit / Vegetables
- Health & beauty
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- Household / Non-food
- National lottery
- Milk
- Newspapers / Magazines
- Packaged groceries
- Snacks
- Soft drinks
- Tobacco
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Who operates Convenience stores?
Convenience store ownership is highly fragmented, with a large number of operators present. Store operators may be divided into several types (also known as “segments”):
- Co-operative (e.g. ,The Co-operative Group, The Southern Co-operative)
- Forecourts (dealer and company-owned e.g., BP, Shell, Total)
- Multiples (convenience specialists and some supermarket based chains e.g., Mills, Tesco Express)
- Symbols, Franchise and Fascias (e.g., SPAR, Londis, Premier)
- Non-affiliated independents
How many Convenience stores are there?
At the end of April 2010 there were 48,410 convenience stores in the UK, representing a year-on-year decrease of 0.5% over the latest 12 month period.
Research from IGD also shows that symbol groups remain the fastest growing part of the sector, with over 1,000 additional stores trading compared to 12 months ago. This was driven by an increasing number of stores recruited from the non-affiliated independent sector.
The chart below shows the number of convenience stores by type in the UK:
Convenience store numbers
Source: IGD Research, June 2010
What is the sector worth and how well is it performing?
UK convenience stores generated total sales of £30.9bn in the 12 months to April 2010, a 6.3% increase on the previous year. The value of the market continued to grow despite a 0.5% fall in store numbers, and now represents 20.5% of the total UK food and grocery market.
This accounts for 20.9% of the total UK grocery market which was valued at £147.5bn over the same period and growing at a rate of 4.1% on a sales basis for the year. Hence, the UK convenience store sector is growing at a faster pace than the overall market.
Many of the factors which have fuelled growth in the sector in recent years continue to remain present. These include the rise of single person households, a growing population, an increase in the number of women in work and longer working hours.
Improved operational standards and the roll-out of more modern, tailored convenience solutions are additional factors underpinning the growth in convenience. The sector as a whole is showing better awareness of shopper trends, both those unique to the small store sector as well as those impacting development in larger store formats.
The chart below shows the UK convenience market value by type:
Convenience sector value
Source: IGD Research, June 2010
What is happening in the Convenience sector?
Co-operative Convenience Stores
Co-operative convenience stores reported another strong year of growth, with total sales up 8.8% in the 12 months to April 2010, and like-for-like sales growth proving to be an important part of this success during the last period.
2009 was a significant year for The Co-operative Group as it began work on integrating the core of the estate acquired from Somerfield. A total of 181 Somerfield stores were converted into ‘The co-operative’ banner during its 2009 financial year.
New store growth within The Co-operative Movement was negatively impacted, however, by the divestment of over 130 stores from The Co-operative Group as a result of its tie-up with Somerfield. This regulatory divestment programme provided a number of opportunities for other co-operative societies to further develop their supermarket and convenience estates however.
Consolidation within the Co-operative Movement has also been ongoing, with The Plymouth & South West Society joining The Co-operative Group in September 2009.
Forecourts
After the slight rise in the number of forecourt stores reported in the 12 months to April 2009, forecourt store numbers are now in decline once more, with the Energy Institute reporting a record low number of forecourt sites at the end of 2009.
Fewer stores combined with lower levels of inflation, particularly on tobacco products, meant that sales growth on the forecourt slowed over the last year. The increasing penetration of supermarket and symbol groups, the further roll-out of best in-class formats, and the transfer of sites into the ownership of independent multiples does however provide a positive outlook for the years ahead.
Forecourts factsheet
Convenience Multiples
The convenience multiples continued to add to their store portfolios during the past year, with Sainsbury’s in particular accelerating its growth following a year of rationalisation and store closures within its convenience business. The rate of expansion in this part of the sector in the latest year was, however, negatively impacted by the loss of over 250 ‘The Local’ stores linked to the demise of First Quench Retailing which fell into administration in October 2009.
New entrants continue to be attracted into this segment, with existing grocery retailers in particular seeking to further segment their store estates to tap into the growth in convenience spend e.g. Waitrose.
Convenience multiples continue to generate the highest amount of sales per store (£32,037 on average each week) according to IGD's 2010 Convenience Retailing Survey.
Symbol Groups
The symbol group segment was the fastest growing convenience segment over the last year, with total sales increasing at a faster rate than the convenience multiples for the first time in a number of years. This was driven by the addition of over 1,000 new stores, increased promotional activity, range developments, and maturing sales from stores which transferred into the segment two to three years ago.
Delivering improved value for money has been a key focus for the sector in the past 12 months, together with the development of new formats, both at the larger and smaller end of the spectrum. Symbol group packages continued to strengthen over 2009, with new promotional campaigns, added value ranges and greater head office support providing additional tools and solutions for retailers to better cater for rising shopper expectations.
Symbol Groups factsheet
Non-Affiliated Independents
The number of non-affiliated independents continues to fall, with the total number of stores in this segment declining from 21,950 to 20,860 in the 12 months to the end of April 2010, a decline of 5.0%. Although store numbers in this segment are in long-term decline, the non-affiliated independent store segment still accounts for 41.3% of all UK convenience stores, and so remains an important route to market for many businesses.
While sales within this segment face continued pressure, many retailers have been able to deliver strong sales growth by responding to local shoppers needs and positioning their stores at the heart of the communities in which they operate.
What will the convenience sector look like in the future?
By 2015, IGD expects the sector to be worth £41.3bn in annual sales, an increase of £10.4bn on the latest year. This represents a 33.7% increase over a five year period, or a CAGR of 6.0%.
Convenience multiple stores are expected to contribute mostly to this growth, with over 1,000 additional stores forecast to open by April 2015. Expansion will be driven primarily by the key supermarket operators as they look to accelerate their presence in the coming months.
However, a number of legislative and economic ‘pressure points’ currently hang over the future performance of the sector. The ban over the future display of tobacco products, the threat of bootlegging and increased tax on certain convenience products remain key challenges for convenience stores to overcome. These issues will be coupled with rising levels of unemployment and concerns over the state of the nation’s health. Convenience store operators therefore appear set to diversify further in meeting more shopper needs, though will need to remain focused on delivering value.
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