Convenience stores in the age of speed
In the age of same-day delivery, click-and-collect and gig-economy-powered food delivery services, convenience has fast become the name of the game in retail.
Many large-scale retailers are searching for ways to streamline their offerings and make them more convenient to attract the limited consumer spending flowing into the industry – spend which is regularly going to more experiential offerings.
But where does this leave the $4.7 billion convenience industry?
“Operators in the convenience stores industry have faced difficult trading conditions over the past five years,” says IBISWorld senior industry analyst Bao Vuong. “Fierce competition among industry players and from external sources such as supermarkets has also negatively affected industry players over the period.”
According to Vuong, changing consumer behaviour has also created an opportunity for convenience stores to fill the need for more general daily topups – a trend which has led supermarket players to experiment with smaller, more localised offerings.
This better serves customers who do a more regular grocery shop, rather than a large weekly, or even monthly, endeavour. While grocery shoppers may still prefer to head into a traditional supermarket, many are willing to pay more for the convenience and quick service offered by stores such as Coles Express, 7-Eleven and even BP.
The sector can also generate further growth by expanding into new areas, such as fresh food and healthier food offers, as well as investing into further sectors, such as parcel collection and dry cleaning, as was recently announced by Caltex.
The transformation of the servo According to BP Australia’s general manager of retail, Amanda Woollard, the lines between traditional retail segments are blurring, intensifying the competition and disruption felt across the entirety of the industry.
“As always, consumer behaviours are influencing the speed of change and there seem to be two very clear trends dominating today’s convenience retail landscape: technology is king, and time is a value proposition,” says Woollard. “Our customers are more informed and connected than ever before, and a world-class customer experience is in demand. This means we need to be pre-empting their needs and bringing new offers to market that don’t just meet but exceed their expectations.”
Woollard points out that as customer needs and desires change, so to must the offerings from retailers. As such, the ‘servo’ of old has been superseded by a fully-fledged retail experience.
“A key pillar of our strategy is about giving back time to our customers in their day. We’re seeing a rise in urbanisation, so we’re focused on providing time-pressed, urban shoppers the flexibility to buy what they need, when they need it, and in a location that is convenient to them.”
This methodology has pushed BP to embrace a larger focus on providing meal options, known as the ‘Food for Now, Food for Later’ pillar – a larger food offering which includes ready-toeat meals, as well as meals made to be eaten later in the day, reducing the time customers need to cook dinner when they get home.
According to the Convenience Measures Australia 2017 Shopper Tracker Report, 48 per cent of consumers visiting petrol and convenience stores are looking for something to eat, drink, or something to snack on between meals – providing a large opportunity for conveniencebased retailers to fill this gap.
“The notion of three seated meals a day and an hour of grocery shopping on the weekend no longer holds for busy Australians,” says Arnold. “We see that customers are eating on the go more frequently and planning their meals in advance less and less. “With Australians doing their grocery shopping via multiple smaller shops, small-format convenience stores are playing an increasingly important role.”
The convenience retailer is also diversifying its product range, incorporating further healthy options, putting a larger emphasis on ensuring it is engaging in ethical sourcing of goods.
“While we are definitely incorporating healthier options into the BP range, there are supply chain challenges with stocking fresh produce in small-format stores, such as cost, storage and waste,” Arnold says. “The smaller format supermarkets have the advantage of scale, piggybacking off the big box supermarket network. However, that isn’t deterring us from us exploring new offers.”
The future of Coles When supermarket Coles split from former parent company Wesfarmers, chief executive Steven Cain noted that the retailer would be shifting into new category directions in order to better survive in the sometimes chaotic modern retail environment.
Between a push towards more ready-made-meals, as well as a more localised, convenience store format trial known as Coles Local, the retailer has begun doubling down on the increasing need for convenience in customers’ lives.
“We know our customers’ needs are changing rapidly, and we are evolving our offer accordingly,” says a Coles spokesperson. “The Coles Group continues to invest in its store network, with the rollout of new store formats and innovation trials in supermarkets and Coles Express sites.”
One of these new store formats is an expansion of the Coles Express formula, known as Coles Express Convenience – operating as a fuel-less, standalone counterpart to the more traditional Coles Express offering.
These offerings stock a wider range of fresh options and pantry staples than an Express store would, as well as offering hot roast chickens, premade food-to-go options, and bakery goods, in order to better facilitate the convenience expected from the Coles consumer – albeit in a smaller, more focused offering.
The supermarket brand is also looking outside of its own walls to deliver a truly convenient option for customers by fostering partnerships with businesses such as Uber Eats and eBay to “help time-poor customers access the Coles range from the palm of their hands”.
The supermarket’s Uber Eats partnership allows customers to order from a healthy range of options and is currently operating out of a small number of Coles sites across Sydney and Melbourne.
“The menu includes ready-to-eat and ready-to-heat items such as roast chicken, deli salads, curries, bakery items and frozen desserts,” says the Coles spokesperson, “as well as meat bundles, fresh fruit and vegetables, milk, yoghurt, and even cheese and dips.”
The brand has also partnered with online marketplace eBay – the first supermarket to do so – which allows customers in Sydney, Melbourne and Brisbane to order pre-packed food and pantry items, as well as household goods, using the online service.
“Above all, it’s our team members who are the key to our business, and we are committed to continuing to evolve our product offer and delivering passionate customer service year round.”
Sustainability on the go Founded on the principle that, as modern life would continue to get faster, convenience retailing was the way of the future, 7-Eleven has grown to 680 stores across Victoria, New South Wales, the ACT, Queensland and Western Australia. General manager of marketing Julie Laycock explains that just as other players in the convenience space have grown to keep up with customer demands over the last decade, they too have seen an increased focus on food-on-the-go and an expanded digital offering.
“Customers expect more. They want digital interactions and tools that make their lives easier,” Laycock explains. “They also expect to have sustainable choices available, whether it’s being able to use a reusable cup for their coffee, get a paper bag instead of a plastic one, to recycle a single-use cup or straw, or buy free-range eggs instead of caged. “Brands have to enable sustainable choices for their customers wherever possible.”
7-Eleven has also been experimenting with smaller-format locations in response to the changing behaviour of consumers – transforming many of its central business district locations to better provide what customers are looking for.
Customers don’t usually top up their groceries at the smaller format stores, says Laycock, but they might have to grab a quick bite to eat when they fill up their fuel. “With these stores, they [will] visit once or twice a day to grab a coffee, a snack or a meal on the go, and with the stores being smaller in size, they needed to change to suit customer needs and traffic patterns.”
The result is stores that have a smaller focus on grocery items, but more space for food-on-the-go items, drinks, confectionery, snacks, and an increased number of coffee machines – with more than 160 stores upgraded with additional coffee machines in the past 12 months.
More than 300 7-Eleven stores will see daily fresh bakeries implemented, and cup recycling units to approximately 200 new stores to support recycling efforts as the chain’s coffee sales grow.
Even with these changes, Laycock notes the pace of shifting customer behaviours is the biggest challenge, as well as 7-Eleven’s greatest opportunity, especially when it comes to digital.
“Digital will continue to be a huge challenge – consumers expect to be able to interact with their favourite brands, not only in-store but online with a range of options that save them time. “For our business to continue to grow, we need to be willing to invest and push ourselves to evolve.”