Verdict European Convenience Retailing Case Study - Convenience in 2013 (T…

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Trends towards top-up shopping in Europe are bringing more frequent visits and more discerning consumers to convenience stores. This has created a number of challenges for retailers seeking to expand as well as opportunities to benefit from the spotlight on the sector. Five key strategies for succeeding in this dynamic market are identified by Verdict in their latest research. For more information or to buy the full report, follow this link http://bit.ly/XibM6G

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Verdict European Convenience Retailing Case Study - Convenience in 2013 (T…

  1. 1. European Convenience RetailingCase study: Convenience in 2013:The Latest European InnovationsInnovation abounds in the convenience marketand grocers react to changing consumer habits.Analysts at Verdict Research identify the keytrends in this dynamic market. October 2012 www.verdict.co.uk
  2. 2. European Convenience Retailing Case study: Convenience in 2013: The Latest European InnovationsTrends towards top-up shopping in Europe are bringing more frequent visits and more discerningconsumers to convenience stores. This has created a number of challenges for retailers seeking toexpand as well as opportunities to benefit from the spotlight on the sector. Five key strategies forsucceeding in this dynamic market are identified by Verdict in their latest research.Multiples seek acquisitions to expand intoc-stores: Strategies for successful acquisitionAs retailers seek to capitalise on growth in the European convenience sector, acquisitions aretempting many as a quick route to increasing c-store coverage. Andrew Stevens, Retail Analyst atVerdict Research notes, “Reitan Service Handel (RSH) and Valora are two European retail groupswhich have benefited from expansion through acquisition, with 72.3% and 85.0% y-o-y uplift instore numbers respectively in the year to June 2012.”Figure 1: European multiples convenience store growth 85.0 72.3 21,775 18,720 19,404 16,584 16,182 2008 2009 2010 2011 2012 Store numbers Total store number growth (%) Reitan store number growth (%) Valora store number growth (%) Note: Total store numbers = 5 key European retailers (Tesco, Carrefour, Spar, Reitan, Valora) convenience stores Source: Verdict Research2 www.verdict.co.uk
  3. 3. European Convenience Retailing Case study: Convenience in 2013: The Latest European Innovations“However, acquisitions cost more than the asking price for the stores in question,” Stevenscautions, “They consume much management time and represent a long-term financialcommitment.” There are some simple assessments retailers should make when considering thisroute to expansion;• Seek an established retailer – One with a well developed portfolio will not require too much management time• Consider product sourcing – Valora’s acquisition came alongside a five year agreement with Lekkerland. However, supplying symbol groups will always present a difficult task• Plan for the future – Ensure there is a contingency plan in place if a partnership with a wholesaler should end• Seek new territories – Avoid cannibalisation by looking outside the home market• Recognise cultural similarities – Seeking similar cultures will ease the transition to a new market. Reitan have expanded within Scandinavia and the Baltics to avoid unknown territory• Appreciate the aftermath – Valora’s acquisition of Convenience Concept added 1,300 stores to its portfolio, covering the Cigo, ServiceStore DB and U Store fascias leaving the retailer with seven fascias in total which it plans to consolidate into just three.3 www.verdict.co.uk
  4. 4. European Convenience Retailing Case study: Convenience in 2013: The Latest European InnovationsThe arrival of the grocers brings a new freshfocus in c-stores: M Local leads the fieldAs multiples expand into c-stores they bring a Figure 2: Morrisons first M local store at Ikley 2011new expectation from shoppers who are seekingsupermarket quality on fresh from local stores.There has been a marked improvement inquality standards and availability in fresh foodsat European convenience stores in 2011/2.Morrisons in the UK is pioneering both innovativemerchandising and new supply chain conventionsfor its newly launched c-store fascia, M Local.M local stores are around 3,000sq ft with 58.0% ofspace dedicated to fresh food. As at June 1, 2012there were four M local stores with a further 20openings planned for the remainder of the financialyear to March 2013. Morrisons hopes to roll out a Source: Morrisons, Verdict Researchfurther 50 convenience stores in the year toMarch 2014.Figure 3: Morrisons hub and spoke convenience model 2012 M Local M Local M Local M Local M Local Morrisons Supermarket M Local M Local Source: Morrisons, Verdict Research4 www.verdict.co.uk
  5. 5. European Convenience Retailing Case study: Convenience in 2013: The Latest European InnovationsSenior Analyst at Verdict Research, Cliona Lynch explains how the retailer is innovating in its supply logistics,“Morrisons operates a hub and spoke model to supply its growing convenience estate. This means thatbetween four and eight smaller M local stores will be serviced from a larger Morrisons’ supermarket. Thissupermarket will provide deliveries of fresh fruit, vegetables, meat, fish and so on up to four times daily tothe convenience stores.”Figure 4: Fresh food merchandising in M local 2012 “This model will ensure the high standards in fresh from counters in supermarkets are consistent in smaller stores and, more importantly, that customers can depend on availability.” Innovative merchandising in M Local stores provides a signpost to the importance of fresh food to the offer. Cliona Lynch describes how Morrisons is setting a high standard for convenience retailers, “Fruit and vegetables are merchandised loose and in rustic, market style baskets. Stores also include fresh bread, freshly squeezed orange juice, coffee bean grinders and a strong range of food- Source: Steve Dresser to-go products, including salad and www.ukretailers.blogspot.co.uk, Verdict Research prepared fruit counters.”5 www.verdict.co.uk
  6. 6. European Convenience Retailing Case study: Convenience in 2013: The Latest European InnovationsWith fresh & quality improvements comea blurring of boundaries with foodservice:Rewe-to-go can learn from Sainsbury’sFresh KitchenFood-to-go in convenience stores is not new. However, in 2012 we are seeing the food-to-go offer ofretailers improving in range and quality to a stage where it rivals foodservice. As these improvementstempt shoppers to trade down to benefit from the value of convenience stores, foodservice providersbecome direct competitors. But there are untapped opportunities for c-stores if they can deliverfurther innovation.Figure 5: Meal time opportunities for convenience retailers Lunch meal deals Breakfast & Dinner OOH Improving quality & range High street café look & feel Source: Verdict ResearchRewe-to-go, the Rewe group’s standalone food-to-go store, opened in Cologne, Germany in the springof 2011. The flagship 130m ² store has six express check-outs, an instore microwave and sells exclusivelyfood-to-go products. Cliona Lynch notes “The most interesting aspect of this opening by Rewe is thecomment by the group’s CEO that key competitors for the store were McDonalds and Starbucks.”“This clearly signifies a shift in grocery retailer competitive strategies to target not only other retailersbut also foodservice providers.”6 www.verdict.co.uk
  7. 7. European Convenience Retailing Case study: Convenience in 2013: The Latest European InnovationsFigure 6: Sainsbury’s Fresh Kitchen 2011 Source: Sainsbury’s, Verdict ResearchHowever, lessons must be learned from the experience of Sainsbury’s in the UK. Fresh Kitchen, a standalone food-to-go concept was opened by the retailer on London’s Fleet Street in July 2011 and closedin March 2012. “While the foodservice market may appear lucrative to grocers is it important that theydo not underestimate existing foodservice competitors who will be fighting to retain share,” warnsLynch “There must be a sufficient gap in the market for a new entrant, as was not the case in London,or the entrant must introduce something significantly different from the store offer, with new andexciting products and instore ambience to tempt shoppers.”7 www.verdict.co.uk
  8. 8. European Convenience Retailing Case study: Convenience in 2013: The Latest European InnovationsTempting online shoppers instore throughClick & Collect: Carrefour sets the standardCarrefour has introduced click & collect on groceries at its Carrefour city convenience store outletin Paris’ St Lazare train station. The store opened in March 2012 and the Mon Panier app launchcoincided with the opening.Figure 7: Carrefour city’s Mon Panier app 2012 Source: Carrefour, Verdict ResearchThe app lists 1,500 core items and is linked to store availability. Staff Figure 8: Mon Panier kioskat the store pick orders ensuring collection is available two hours afteran order is placed. There is no minimum spend for shoppers and nocharge for the service.According to Cliona Lynch, Carrefour’s innovative new app sets ahigh standard for the emerging area of click & collect groceriesat convenience stores. “The two hour deadline set by Carrefouris industry leading,” Lynch notes. “However, it matches shopperdemands which are ever-increasing. Improvements in technology andservice levels are creating higher expectations among shoppers forhow retailers can and should be meeting their needs.” Source: Carrefour, Verdict Research8 www.verdict.co.uk
  9. 9. European Convenience Retailing Case study: Convenience in 2013: The Latest European InnovationsCreate virtual theatre to inspire shoppers:Delhaize trumps Ocado in bridging onlinegap with shopping wallsUK online grocer Ocado has opened its third pop-up shopping wall concept in Birmingham on 16July. The walls are used by Ocado to generate publicity and shopper interest in its mobile app. But theproblem with Ocado’s wall is that static images do not excite a tech savvy shopper and the missing linkto click & collect limits the appeal.Delhaize has taken the shopping wall concept one step further, by positioning its ‘cubes’ in busy trainstations across Belgium and adding click & collect to the offer. Positioning in train stations targetscommuters at a key dwell time in their day. Moreover, Delhaize’s concept allows shoppers to orderproducts for collection at the other end of their commute.Figure 9: Delhaize Shopping Cube Source: Delhaize.be, Verdict ResearchLynch believes there is huge potential in shopping walls, “Both Ocado and Delhaize merely scratchthe surface of what could be a game-changing concept bridging the gap between the growing onlineand convenience food retail markets in Europe.”Lynch adds “Our research highlights convenience and online retail are the most buoyant channels forfood and grocery spend in Europe as more people seek anytime, anywhere shopping. Thetypical convenience shopper is young; 43.1% are aged between 18 and 24 years. While Delhaize isahead of the competition there is much more convenience retailers can do to satisfy the needs ofthese shoppers”.9 www.verdict.co.uk
  10. 10. European Convenience Retailing Case study: Convenience in 2013: The Latest European InnovationsAndrew Stevens, Analyst at Verdict concludes “Creating interactive virtual shopping walls acrossmetropolitan train stations will engage shoppers as they consider meal options ahead of their journeyhome. Incorporating recipe ideas and real-time promotional offers will create a more eye-catchingdisplay and generate click-through to the retailer’s mobile site or app. ““Key to success of the concept is linking to quick and easy click & collect facilities at a conveniencestore at the other end of the shoppers train, tube or bus journey.”As top-up shopping becomes a norm for European grocery shoppers, the convenience sectoris adapting to new challenges. Expanding multiples are seeking acquisitions to facilitategrowth, fresh food is reaching new standards and as it does so, food-to-go is becoming a keybattleground. Meanwhile, innovations in technology will see click & collect grow in importanceas virtual shopping facilities attract attention away from the c-store itself.10 www.verdict.co.uk
  11. 11. European Convenience Retailing Case study: Convenience in 2013: The Latest European InnovationsThis case study was taken from Trends and Innovations in European Convenience Retailing –a Verdict Channel Strategy Report.For more information on this report please email information@verdict.co.uk orvisit http://bit.ly/RKQJrETrends and Innovations in EuropeanConvenience RetailingIntroductionAs top-up shopping becomes a norm for European consumers, the convenience sector is havingto adapt to new challenges. Shoppers regularly visiting their local c-store are demanding improvedranges and innovative services. C-stores which adapt quickly to implement strategies whichrespond to these demands will reap rich rewards.Features and benefits• Justify investment in the convenience retailing sector by uncovering evidence of the consumer trends supporting• Choose the best path to growth based on case studies of convenience strategies of Carrefour, Morrisons, Rewe, Delhaize, Reitan, Tesco & Valora• Quantify the potential of introducing click & collect facilities and shopping walls to integrate new technology with c-stores• Assess the potential risks and benefits of expanding into convenience through acquisition and into food-to-go, foodservice and fresh from a c-storeHighlightsEuropean shoppers are switching away from hypermarkets and are buying little and often in astore close to their home or work. The ongoing move towards top-up shopping is validated in ourConsumer Insight Survey which shows the proportion of shoppers who make top-up purchasesevery day at a convenience store has risen to 5.1% from 2.6% in 2009.Food-to-go in convenience stores is nothing new. However, the food service propositions ofsome c-store retailers, such as Rewe, are improving so rapidly that they are starting to rivaltraditional food service specialists. This has created a blurring of the boundaries between thetwo types of retailer.Virtual shopping walls in c-stores serve to create a bridge between two grocery retail channels,catering for the needs of tech savvy convenience shoppers who also want to use online shoppingservices. Such initiatives scratch the surface in terms of the possibilities for channel integration andthis report explores further opportunities.11 www.verdict.co.uk
  12. 12. European Convenience Retailing Case study: Convenience in 2013: The Latest European InnovationsYour key questions answered• How is the growth of multiples impacting the convenience market? What paths to growth are multiples pursuing? How does this affect your business?• What are the latest innovations in convenience retailing? How have Carrefour, Rewe, Morrisons and Sainsbury’s innovations performed?• How can I adapt my strategy to benefit from growth in top-up shopping? What are the pitfalls to avoid and the key areas to invest in?• Which retailers have been making acquisitions and what features should I be looking for in an acquisition target?• Which convenience retailers have managed to develop strong food service propositions and which parts of their strategy should I replicate?About VerdictVerdict is a retail information specialist within the Informa Group. With almost 30 years’ experience,Verdict publishes unrivalled independent analysis. We provide a complete picture of the UK andincreasingly the international retail arena, helping retailers, manufacturers, service suppliers,analysts and consultants to fully exploit opportunities within the industry.www.verdict.co.uk12 www.verdict.co.uk

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