The Future of Convenience Retailing in Europe

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The Future of Convenience Retailing in Europe
Published on April 2010

Report Summary

Introduction

Socio-demographic changes and new consumer trends are combining to create new convenience trends across Europe, and many
retailers are already on the path of developing their store formats to capitalise on a growing demand for convenience. In response to
varying consumer demands retailers are trialing new concepts tailored to specific convenience needs, creating a broader range of
c-stores.

Scope

*Insight into the beliefs and behaviours of convenience consumers covering their shopping habits as well as their cooking and
consumption preferences.

*Analysis of retailers and their response to growing opportunities in the sector including store expansion, format diversification and
brand convergence.

*Coverage of the key threats facing the traditional convenience retailer including supermarkets' and discounters' continued focus on
the sector.

*A comprehensive set of recommendations surrounding store expansion, product ranges, private label strategies, in-store services
and format customisation

Highlights

European retailers are rapidly growing their convenience store bases as smaller formats outperform ailing hypermarkets. Many
smaller formats have been adapted to suit the different convenience trends such as increased demand for food on the go and food
service options.

However convenience stores' growth is not all smooth sailing. The stores face growing pressure from discounters also entering the
sector and expanding their convenience offer.Furthermore, the success of smaller formats has pushed more retailers to downsize
their stores, further encroaching on the neighbourhood market.

Despite increased competition in the convenience market, established multiples continue to stay ahead of the game introducing new
concepts and formats to differentiate their stores and sustain footfall. New product ranges, revamped private label offers and extra
services and facilities are all helping propel the convenience concept further.

Reasons to Purchase

*Lead innovations within you company by accessing lots of ideas from across Europe which can be applied to your own convenience
operations.

The Future of Convenience Retailing in Europe Page 1/8


*Develop strategies that respond to the latest consumer eating behaviours and preferences across areas such as organics produce
and private label.

*Ensure that decisions on location, formats, brand and range response to the competitive threats facing the convenience retailing
sector.

Table of Content

EXECUTIVE SUMMARY 2
Summary points 2
Smaller formats outperforming the rest 2
Rise of the multiples 2
Regional expansion of multiples' convenience formats 2
Traditional convenience store and independents diminishing 2
Discounters venturing into convenience realm 2
Increased competition from retailers downsizing formats 2
Changing demographics and consumer behaviour creating new fields of convenience in Europe 2
More single person households and an aging population boosts demand for shopping locally 2
More urban living provides boost to City formats 2
Consumer purchasing habits are becoming more erratic 2
Consumer eating habits are becoming more varied 2
As one size does not fit all retailers need to adapt convenience concept to target local market 2
Main conclusions 3
Smaller formats outperforming the rest 3
Rise of the multiples 3
Regional expansion of multiples' convenience formats 3
Traditional convenience store and independents are diminishing 3
Discounters are venturing into the convenience realm 3
Increased competition from retailers downsizing formats 4
Changing demographics and consumer behaviour creating new fields of convenience in Europe 4
More single person households and an aging population boosts demand for shopping locally 4
More urban living provides a boost to City formats 4
Consumer purchasing habits are becoming more erratic 4
Consumer eating habits are becoming more varied 5
As one size does not fit all, retailers need to adapt the convenience concept to target the local market 5
Table of Contents 6
Table of figures 7
CONSUMER DEMOGRAPHICS AS DRIVERS OF CONVENIENCE 8
Many socio-demographic trends create a business case for investment in convenience 8
Europe's ageing population - time for retailers to respond 9
Retailers must be mindful of the new financial constraints of the aging population 10
Case study: German grocer Edeka has adapted its stores in response to the ageing population 10
More people are shopping for one 11
A growing urban population across the EU will influence retailers' expansion plans 11
CHANGING SHOPPING HABITS AS DRIVERS OF CONVENIENCE 13
The top-up shop is growing in popularity 14
Extended store opening hours suit busy lifestyles 15



For top-up shoppers store proximity has a high influence on where they choose to shop 16
Online grocery shopping is also a form of convenience retailing 17
The vast majority of consumers don't currently buy groceries online 17
Shop and delivery options are broadening the appeal of online grocery shopping 20
Pick and Drive models are emerging 20
The way things are going - Internet for main food shop, local store for top-up 21
COOKING AND EATING HABITS AS DRIVERS OF CONVENIENCE 22
Meals and snacks continue to become more fragmented 22
Consumers are increasingly prone to skipping meals 23
Food to go is a growing sector 25
Consumers are less willing to spend their free time on food preparation 27
There is a rise in the variety of foods consumers are willing to try 29
Healthy eating is a growing concern among consumers 30
There is demand for fresh food options in local stores 32
Demand for organic and locally produced goods varies 33
A proportion of convenience customers are value seekers 36
The propensity to buy private label is currently lower among convenience customers 37
CONVENIENCE RETAILING COMPETITIVE LANDSCAPE IN EUROPE 39
Convenience and local stores are outperforming hypermarkets 39
Case study: Casino riding on convenience stores' resilience 39
Case study: Carrefour's hypermarkets suffering while convenience is outperforming 41
Retailers are expanding their convenience store base 42
The multiples have been expanding their convenience store estate 43
Multi-format strategies are being developed to encompass convenience 45
European grocery retailers are also increasingly implementing brand convergence strategies 45
Case study: Carrefour extends multi format single brand strategy to convenience 46
Case study: Rewe's brand convergence strategy - from many to one 47
Brand convergence has operational advantages 48
Independents have to respond to the expansion of the multiples 48
Acquisitions will provide a quick route to convenience growth for some 48
The focus on the convenience format is forecast to continue 49
The convenience concept is being revitalised in Central and Eastern Europe 50
Smaller formats are being used to exploit opportunities in smaller catchment areas 50
Foreign entrants are involved in format diversification 50
Some domestic players are extending their store network 50
Legislation issues are driving growth of the convenience format 51
Easing of the loi Raffarin in France provides boost to small store openings 51
Opening hour liberalisation in Germany has been taken advantage of by most grocers 52
In Italy, regional differences make legislation challenging for all retailers 52
Polish retailers target small store expansion at petrol station locations exempt from trading bans 53
THE FUTURE OF THE CONVENIENCE MODEL 54
New formats and concepts are emerging 54
Retailers are extending the food to go offer to include coffee and hot food to take away 55
Case study: Billa grabbing a share of Austrian food to go market 57
Food to go offers increasingly cover all mealtimes 58
Food service offers have resulted in seating areas in some stores 58
The inclusion of delicatessens is growing in popularity 59
New formats are stretching traditional perceptions of the convenience model 60
El Corte Inglés has opened a convenience department store 60
Retailers are mixing and matching new concept ideas 61



Chez Jean is the new generation convenience store in France 61
A range of innovative technologies are very relevant to convenience retailers 65
Digital display technology creates a platform for consistent pricing and promotional messages 65
New payment technologies can increase transaction times and reduce cash handling and labour costs 67
Self-service check-outs have been installed throughout Europe 67
Contactless payment technology features in some inner city stores 68
Mobile phone payment is being piloted by some convenience retailers 68
Biometric payment methods are relatively uncommon in convenience stores 69
Click/text and collect will become more popular 71
THREATS TO TRADITIONAL CONVENIENCE RETAILERS 72
Discounters pose a major threat to traditional convenience stores 72
Discounters are making inroads into city centre locales 72
Discounters are venturing into the convenience realm 72
Lidl Express case study: Revamping offer to meet demand for convenience and value 72
Dia case study: A discounter's response to proximity shopping 74
Competition from the traditional grocers is also escalating 75
Smaller supermarkets pose an increasing threat to the traditional convenience model 75
New players are entering the convenience realm 76
STRATEGIC RESPONSE - PRODUCT RANGE 77
Launch value ranges and focus on own brand categories 77
Offer low priced own label alternative to price sensitive shoppers 77
Extend private label ranges to grow sales 80
Identify product ranges and categories that create differentiation 80
Implement a stock rotation strategy 81
Ensure products are aligned with key demographic and behavioural consumer trends 82
Offer smaller portion packages for single person households 82
Exploit the trend for entertaining at home 82
Respond to healthy and ethical eating demands 82
Provide locally produced goods where consumers demand it 83
Provide a variety of foods for different preferences 84
Increase promotional activity 85
STRATEGIC RESPONSE - CONVENIENCE STORE OPTIMISATION 86
Respond to changing demographics and consumer behaviour 86
Cater for the rising urban population 87
Extend store opening hours to suit busy lifestyles 87
Refine the store concept for older consumers 88
Explore a variety of routes to growing the convenience store estate 88
Franchising as a route to market should be considered 88
Tie-ups and partnerships are also a way for convenience retailers to expand their presence 90
Consider localisation of the convenience concept 90
The convenience format can be customised to location 90
Target high footfall destinations such a transport hubs 96
Consider service stations as strong growth channels 97
Adapt the store to the community it serves 98
Be mindful of the drawbacks of localisation 100
Offer additional services as a key source of differentiation 101
Adapt store designs and layouts to each kind of convenience store 102
Segment the store into zones 102
APPENDIX 109
Definitions 109



Top-up shop 109
Convenience store 109
Top-up shopper 109
Methodology 109
Online consumer surveys 109
Executive interviews 109
Financial and other statistics 109
Further reading 109
Consulting 110
Disclaimer 110
List of Figures
Figure 1: Socio-demographic drivers of convenience, 2010 8
Figure 2: Comparison of EU age groups, 2009 and 2019 9
Figure 3: Comparison of EU countries by urban population 12
Figure 4: Changing purchasing habits boosting demand for convenience 13
Figure 5: Consumers' frequency to top-up shop at convenience stores, service stations and supermarkets 14
Figure 6: Influence of convenient and/or long opening hours for top-up shoppers in choosing their shopping destination in selected EU
countries 15
Figure 7: Influence of proximity to home for top-up shoppers in choosing their shopping destination in selected EU countries 16
Figure 8: Frequency of consumers buying groceries online in selected EU countries 18
Figure 9: Asda's online customer service representative 19
Figure 10: Changing eating habits and the trend towards convenience 22
Figure 11: Proportion of skipped mealtime occasions per capita per year 24
Figure 12: Frequency of consumers eating a meal on-the-go 26
Figure 13: Consumers' frequency to eat a microwavable meal at home 28
Figure 14: Influence of choice/range of products for top-up shoppers in choosing their shopping destination 29
Figure 15: Frequency of top-up shoppers making attempts to eat healthily 31
Figure 16: Influence of freshness and quality of produce for top-up shoppers in choosing their shopping destination 32
Figure 17: Influence of range of organic products for top-up shoppers in choosing their shopping destination 34
Figure 18: Frequency of top-up shoppers buying local produce 35
Figure 19: Influence of lower prices in general for top-up shoppers in choosing their shopping destination 36
Figure 20: Frequency of top-up shoppers buying private label/store brand products to save money 38
Figure 21: Géant Casino hypermarket versus Franprix like-for-like sales growth, 2008-09 40
Figure 22: Géant Casino hypermarkets versus Casino's smaller formats, total sales growth, 2008-09 41
Figure 23: Carrefour French hypermarket versus convenience store like-for-like sales growth, 2008-09 42
Figure 24: Grocers' convenience store estate growth across Europe, 2009 43
Figure 25: Multiples convenience store expansion, 2003-04 to 2008-09 44
Figure 26: Intermarché format segmentation, 2010 46
Figure 27: Carrefour Montagne brand logo, 2010 47
Figure 28: Planned convenience store openings from selected retailers, 2009-2012 49
Figure 29: Categorisation of convenience formats in Europe 54
Figure 30: Zabka Coffee to Go, Czech Republic, 2009 56
Figure 31: Spar UK food to go concepts, Censa coffee and Kitsu noodles 57
Figure 32: Mercator deli counter in Maxi department store, Ljubljana, Slovenia 2009 60
Figure 33: El Corte Inglés Sanchinarro Convenience Store 61
Figure 34: Chez Jean café bar and newsagents, Paris 2009 62
Figure 35: Chez Jean café bar and sit down area, Paris, 2009 63
Figure 36: Chez Jean store area, Paris, 2009 64
Figure 37: Chez Jean kitchen and food service area 65
Figure 38: 7-Eleven TV 66



Figure 39: Installation of self-service check-outs, Mercator, Slovenia 2009 67
Figure 40: Lidl Express, Edmonton, 2008 73
Figure 41: Netto Døgn, Netto's discount-convenience hybrid model 74
Figure 42: Dia Market, Spain 2008 75
Figure 43: Budgens' Good Value range 77
Figure 44: Sisa's regular private label brand and its Primo brand 78
Figure 45: Leader Price private label goods 79
Figure 46: Díperdí's store banners 81
Figure 47: Conad's Sapori & Dintorni range of locally produced goods 84
Figure 48: Retailer response to key consumer trends 86
Figure 49: Franprix extended opening times, Paris, 2009 88
Figure 50: Casino-affiliated convenience store base growth over 10 years 89
Figure 51: Rural and urban segregation of convenience formats 91
Figure 52: Conad City, Florence, Italy, 2008 92
Figure 53: Franprix, Paris, 2009 93
Figure 54: Rewe City, Munich, 2009 94
Figure 55: Vival, France, 2008 95
Figure 56: Casino proximity formats positioning 96
Figure 57: EDEKA, Munich airport, 2009 97
Figure 58: Carrefour's new convenience banners and location segmentation 99
Figure 59: Zabka branding differences - Poland and the Czech Republic 100
Figure 60: Centra touch screen in the Dublin store offering additional online services 101
Figure 61: Centra convenience store layout, Parnell Street, Dublin 102
Figure 62: Centra store layout in Raheen, Co. Limerick 103
Figure 63: Sainsbury's Local dedicated food to go area 104
Figure 64: Sainsbury's Local location of impulse buys 105
Figure 65: Mercator, Maxi department store, Ljubljana, Slovenia 2009 106
Figure 66: Mercator store layout in Maxi department store, Ljubljana, Slovenia 107
Figure 67: 'AH To Go' blue print store lay-out 108



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