The Convenience Store – how are convenience retailers winning while others fail?

The Convenience Store – how are convenience retailers winning while others fail?

The Convenience Store – how are convenience retailers winning while others fail?
7-11 Test Store in Malaysia – Still a Convenience Store?

At a time when many industry commentators are predicting the demise of bricks and mortar stores, convenience stores are spreading across the globe. Even in markets such as Korea, where there is approximately one convenience store for every 2000 people thousands of new stores are being added every year. So while ‘big box’ retail struggles, and online strides forward, what is it about the convenience store that is helping them thrive, and what does that mean for brands?

Right time, right place

There is something about timing in all of this of course. Recessionary pressures are encouraging shoppers to spend less: and taking smaller shopping trips is a strategy that shoppers increasingly employ. Hypermarkets thrive on their ability to get shoppers to part with cash for things they never planned to buy –  a convenience store offers fewer temptations and so are a haven for the wannabe thrifty shopper, despite prices being a little higher.

The end of the “big shop”

Time is money, and the internet has encouraged shoppers to perhaps see the trip to a superstore as rather arduous. Huge stores, which used to feel like treasure troves, are feeling more like warehouses, and the hours spent on travel, parking, shopping and queuing are a questionable investment. As I argued here, shopping trips are naturally fragmenting to specialists and discounters. As a result shoppers are re-evaluating the convenience store as part of their store repertoire.

Convenience store – Innovator and copycat

Convenience store operators are innovators, or rather, they are magpies. They are incredibly good at spotting a trend, or an innovation in another market, and bringing it in. Their obsession with driving traffic to their stores has led them to bring all sorts of new ideas and services to their stores; creating new reasons for potential shoppers to enter the store. ATMs, bill payment, even laundry and dry cleaning services are now available. Convenience stores sell freshly brewed coffee, and some now offer seating to compete with Starbucks for the on the go coffee moment. None of these is strictly speaking new, but to bring all this and more to a small store footprint is pretty impressive.

Convenience store retailers have a ruthless streak

Convenience stores have limited space, and so space is at a premium. The innovation attitude above needs to be tempered with a ruthless ‘thrive or die’ attitude. Convenience store operators simply cannot afford to carry products of services that don’t deliver huge returns on space. In some markets, new products have only a matter of weeks to prove their worth before being delisted. As a result, cash is not wasted on the bloated ranges found in the modern superstore.

Convenience store retailers have an obsession with inventory

Inventory cost is large for all retailers: for convenience stores it is huge. 7-11 have 16000 stores in Japan: just stocking six units per store of a new SKU is a whopping 96,000 units: a significant investment. So they work hard on reducing the stocks at stores, with some products delivered several times a day, and POS systems which automatically adjust orders based on daily (or hourly) sales. That attention to detail helps them keep their operation lean, and balance off the costs of running so many stores.

So if these are the keys to convenience store success, what should brand owners do about it? When faced with larger and larger listing fees, and demands for higher margins, how should manufacturers handle this rapidly growing and increasingly important channel? In my next post I’ll explore some of the key strategies brand marketers and shopper marketers can employ to win with their convenience store retailers. To make sure you don’t miss it, please subscribe now.

 

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