Convenience stores have an opportunity to carve a new niche

In the latest issue of C&I Retailing Magazine, we spoke with a number of petrol and convenience retailers and industry experts to ask how retail has changed through COVID-19 and for predictions on how it will continue to shift in 2021.

For the third in our series of interviews, we chat with shopper and merchandising expert Pete Hanson, Director Client Service, at Crossmark.

C&I: Have you noticed any new trends emerging over the past six to 12 months?

Pete: The convenience sector has shown agility and flexibility throughout COVID-19. Across the country, people have been shopping more in their own communities, which is providing a boost to convenience stores. This has been a real eye opener for a lot of people who are discovering new convenience offerings in their local areas. 

COVID-19 has educated consumers that convenience stores exist and that they offer a range of solutions which offer convenience for people who are working from home. Now it will be about finding the balance between convenience, price, and the value people place on time, which has always been the challenge with convenience.

There is also a lot more understanding from the convenience sector itself, that there is an offer in it. We’re all so time poor and busy, and time saving solutions are now on people’s radar. We’re even seeing some convenience stores bringing in e-commerce platforms to help drive traffic to stores such as Australia Post setting up ‘parcel lockers’ for parcels to be collected from.

C&I: How have retailers adapted their offer to meet these demands?

Pete: Increased ranging and accessibility are becoming more niche now. The meal solutions category continues to grow, particularly with new partnerships. For example, David Jones and BP have partnered to sell ready-to-go meals, Pie Face is continuing to offer savoury goods through its alignment with United Petrol, and other retailers are trying things such as hot rotisserie chickens in an effort to capture the convenience trade. 

There has also been a massive change in the ownership of convenience stores with Coles and Woolworths expanding their footprint with smaller format local stores that focus more on fresh food and ready-to-go meals. This has come at the expense of smaller convenience operators who have been priced out by familiarity and loyalty.

Metcash also entered the market during the pandemic with an e-commerce platform aimed at encouraging small suppliers into their stores. Prior to this, it required suppliers to meet and liaise with individual decision makers at each store. With 2,500 convenience stores competing with the general convenience customer in local suburbs, this is considered an industry game changer.

C&I: What will be the major challenges and opportunities for convenience retailers in 2021?

Pete: As Australians rely more on convenience stores, operators have an opportunity to carve a niche share in the market that often has bigger margins than big-box retailers. The big opportunity for convenience will continue to be around prepared meals. While lunch and dinner offerings are doing well, the sector is still working out how it can capitalise on breakfast so that’s an opportunity the sector will no doubt work on.

C&I: Have you noticed a shift in consumer behaviour? Do you predict it will continue into 2021?

Pete: As purchasing habits during COVID-19 changed, convenience will continue to be appealing for consumers as they no longer need to drive to a big-box supermarket if they know they can simply walk to their local convenience store to get what they need.

With a savvier bunch of consumers now purchasing from convenience stores and local grocers, Crossmark has noticed a big shift from the original convenience push on drinks, chocolates, cigarettes, and milk to a much broader range of products such as ready-to-go meals and healthy snacks. Even within chocolates themselves, we’ve seen consumers’ preferences change moving from buying on-the-go chocolate snack bars to larger family packs for the home – which brought its own packaging and supply chain implications. There is a distinct shift to healthier foods, with plant-based products being the new trend, but tailored ranging is key and retailers need to find the right offer and execute it correctly. While each demographic area is different, there is flexibility to cater accordingly and make tweaks along the way.

Increasingly, the importance of Australian made and supporting local suppliers is a positive sign for local suppliers and convenience retailers are responding to this customer demand by aligning themselves with locally made product lines.

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