Australian Convenience Store News | The power of Aggregated Volume

It's great to be independent and run your own show. But, is it enough to be conveniently located and open all hours. As Dr Sandro Mangosi of BIS Schrapnel pointed out at the C-Store 2 Winning Edge Seminars in March, customers now want a one-stop service outlet that is convenient in the modern sense of the word.

How can independent retailers access the advantages enjoyed by the large retail chains - buying power, automated ordering and payment systems, innovation, information, marketing, advertising and branding - and still run their own business as an integral part of their community? Buying groups bring independents together to purchase supplies and services at prices more favourable than the individual can negotiate. But, there is more to these groups than buying power.

Capricorn Society Limited is an independent automotive parts buying co-operative, providing parts and services to mechanical workshops, service stations and smash repairers throughout the country. With over 6500 members in Australia, New Zealand and South Africa and over $320 million turnover, it has negotiated supply contracts with over 1,000 companies covering most of a business's daily requirements. They range from genuine hard parts and accessories to batteries, ice-cream and confectionery. To be eligible to be a member you must be either a registered automotive repairer, panel beater, auto electrician, service station or general workshop.

Although members are not obliged to use the preferred supplier, it is usually worthwhile to do so for the rebate. It is also easier - the invoice is processed centrally by Capricorn and the member receives one monthly bill to cover purchases from all preferred suppliers.

"Members are required to pay their accounts on time and support their co-operative." Steve Barraclough, National Sales Manager.

Members invest $500 in Capricorn shares to join, and receive both trading rebates and dividends from surplus. For example, a member with monthly trading through the group of $7,000 who joined in 1997/98 would have received a total of $7,168 in rebates and dividends over 4 years.

United Convenience Buyers All members are independent fuel retailers, but the focus of the buying group is on the shop side of the business. With around 600 members, the group has grown largely through word of mouth. Members tend to share a common philosophy.

"We welcome those who want to improve their retail offer and are prepared to support other members with ideas and communication. Our success is due to member feedback and the generation of ideas." Reg Johnston, Managing Director.

The benefits of membership are favourable trading terms in supplies and equipment and assistance in shop presentation and marketing. However, members are not obliged to use the group's suppliers. On the contrary, if they can get a better deal locally, they are encouraged to do so, and pass the information back to the group. Members can check prices and range any time on the website.

Collective Buying Group is part of the listed Metcash group which includes Campbell's Cash & Carry and IGA Distribution. With about 800 members on the Eastern seaboard and in South Australia, CBG supplies independent retailers that want to keep their own brand by arranging preferential deals for shop supplies and services.

They supply up to 20,000 products in the warehouse and have preferential deals with key manufacturers. The focus is on suppliers of large turnover items where a competitive market exists. Discounts are available on the main grocery, mixed business and convenience store product lines, as well as special arrangements for participating members on petrol, telephone, EFTPOS, phone cards, ATM machines, and shop equipment. Members receive a monthly rebate cheque for products ordered and paid for under CBG.

Members select their own stock, but are required to support the preferential supplier for the items they supply in order to receive the special deals. The specially-negotiated deals are for members that can purchase $5,000 per month (excluding cigarettes). Smaller retailers can use the Campbells Cash & Carry discount card.

Lucky 7 Campbells is now introducing the Lucky 7 Convenience Store brand to support larger milk bars, neighbourhood stores, and service stations which meet certain criteria. There are currently 11 in New South Wales, with plans to have 80-100 along the East coast by the end of the year.

"Lucky 7 has been developed to support single store retailers wanting to operate as an independent, but also benefit from being part of a larger network and having access to modern retailing methods in order to grow and prosper. The larger corner store is usually in a convenient location but now some operators want to move into the next generation and improve their business." Jeff Rogut, Marketing Manager.

By being a member of CBG, stores may apply to become a Lucky 7 Convenience Store which entitles them to the benefits of collective buying through the Campbell's Cash & Carry warehouses and preferred suppliers. They receive advice and assistance with re-branding and modernizing their store image, as well as the use of electronic ordering. The brand will be promoted locally.

Members are required to support all CBG preferred suppliers and promotions, stock a core range of up to 1,000 'wanted' products, and use the common electronic ordering system and shelf labels and stripping provided.

FoodWorks is a public company owned by its network of retailers. Network turnover is $450m. The company provides a central office, including finance and administration, IT, marketing, supply, and training for its network of 100 independent supermarkets (including 37 large convenience stores under the FoodWise brand) in Victoria and southern NSW.

The retailer benefits from buying power not only in goods for resale but for other expenses such as power, maintenance, and trades. FoodWorks also provides marketing services with all promotional material prepared in-house, automated category shelf management, specialist staff. A pricing zone system linked to the store's demographic is under development.

Rebates from the warehouse, supplier incentives, and banner fees are used to pay central office expenses and refurbish stores. Surplus is returned in cash to retailers. Under the banner agreement, the retailer agrees to accept the branding, systems, operational management and control.

"Brand is very important, and ours - 'Little things. Big difference" - is displayed on all FoodWorks material". Peter Noble, CEO.

If buying power is good, is more better?
Lucky 7 and FoodWorks are typical of the trend in independent supermarkets - regional networks growing and merging to become national brands. This is behind much of the rationalization in the sector, and one of the drivers behind FoodWorks' decision to change of supplier from Australian Independent Wholesalers (AIW) to Metcash.

AIW's exit, Food-way's takeover of SPAR to increase its network to 150 locations, Foodland's move into the East by buying Franklins' stores, and its bid for Woolworths NZ are all contributing to the shake-up. For the independent convenience retailer this presents threats and opportunities.