Managing price inflation – the case for convenience

Trade partners driving inflationary price differences across grocery and convenience is not an approach the convenience industry should accept, writes Darren Park.

2022 promised to be a more predictable year for retail, with lockdowns a thing of the past (we hope), where borders are open, populations are out and about, and face-to-face retailing returned to a new normal.

Supply chain issues were known, as were staffing issues, but little did we know that the light at the end of the tunnel was in fact, a train coming at us carrying price inflation.

Shoppers don’t find products ranged in convenience stores by accident, trade partners propose products and retailers range them in-store. The quid pro quo for ranging products is that they generate a fair and reasonable margin for the retailer’s contribution and that the product’s pricing is fairly positioned, encouraging shopper purchase and repeat purchase. A suitable value equation for all participants.

Some of the most well-known and purchased brands out there reach shoppers by accessing multiple distribution channels, including the convenience channel. Multiple sales channels increase the chances that trade partners, retailers, and brands will conflict. Many of our industry trade partners have businesses across multiple channels, from convenience to foodservice and grocery. My largest issue is with pricing conflicts across customers and channels, especially grocery.

Yes, there are stark differences in convenience vs grocery. In grocery, there are in many cases lower margins, costs of just getting in the door, contracts and terms that strongly favour retailers, logistical issues, costly data access and the list goes on. Convenience on the other hand is a channel that allows us all to build brands with greater shared input, more often than not in an environment that is brand rich and in where there’s an absence of private label competition.

Grocery is a battle ground for brands, where the terms ‘Best Value’ or ‘Lowest Prices’ are shared relentlessly at shoppers. Convenience stores don’t trade on these lowest common denominator call outs, we trade on convenience, speed, safety, cleanliness, and community. A range of attributes that are so complementary to experience retail – which where so many brands wish to be.

And it’s this potential inflationary driven conflict of convenience pricing, that is at the centre of my opinion piece.

Why is convenience in Australia regularly treated differently when it comes to product cost differences across channels and in some cases retail customers in the same channel? Isn’t this counter intuitive to growing business outside of low margin, less competitively intense retail environments? Shoppers have changed their habits during COVID and while some of that will snap back to previous behaviours, much of these new habits will stick – and we all have a chance to make a generational difference on the way we encourage shoppers to engage with brands in convenience.

Trade partners driving inflationary price differences across grocery and convenience or across retailers in the same channel, is not an approach the convenience industry should accept. We must stand together and with our own unique approaches, not allow our shoppers to see us as anything less than being a price and ranging competitive solution to their shopping missions – not as a margin balancer for a brand’s grocery ambitions. We as a convenience industry, deserve nothing less.

This article was written by Darren Park, CEO, UCB Stores, for the June/July issue of C&I magazine.

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