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  1. Analysis
August 18, 2010

The just-food management briefing – convenience stores – part III

Every country had its own take on convenience stores. These retail traditions tend to be rooted in local cultures, making a certain combination of goods acceptable in one country, but not another.

Every country had its own take on convenience stores. These retail traditions tend to be rooted in local cultures, making a certain combination of goods acceptable in one country, but not another.

In some countries, traditions vary by region. In Canada, the French-speaking province of Québec has its own kind of c-stores, independent general corner shops called ‘depanneurs’ that stock all kinds of food and non-food items. These shops are not found elsewhere in Canada, where c-stores are more likely to be large chains.

But, in all countries, it does seem to pay to innovate on more than just the location of food-based

c-stores and their combination of food and non-food lines. Impulse buying of food can happen, after all, at any time.

Japan is a case in point. While for years the Japanese c-store sector was one of the few bright-spots in the stagnated domestic retail industry, this market appears to have reached saturation point with more than 40,000 outlets, and sales dropping for 12 straight months to May, according to figures from the Japan Franchise Association.

In this new harsher environment, c-stores are establishing tie-ups with companies in industries across the board in order to attract customers and protect their bottom lines. “These non-capital tie-ups help act as magnets to bring customers in, which helps core business such as prepared food, which makes up around 30% of sales,” suggests Taneo Moriyama of food and retail research firm Insight Inc.

Japan’s second-biggest c-store chain, Lawson Inc, has become active in the fledgling electric car sector. Last year it ordered a fleet of corporate electric vehicles from Mitsubishi, and then installed chargers in front of dozens of its shops – available free to customers. In June, Lawson joined a consortium launched to help the conversion of petrol-engine vehicles to batteries, and to fund start-ups in the electric car sector. 

Lawson still looks to petrol sales as a way of generating food business, and recently joined a loyalty points system with oil wholesaler Showa Shell Sekiyu and independent filling stations. Lawson is also expanding its business with drug-store operator Qol, opening 30 c-stores containing pharmacies over the next two years. Here, the food retailer is looking to exploit Japan’s relaxation last June of regulations regarding sales of pharmaceuticals. Because a form of pharmacy license is still required, Seven-Eleven Japan is arranging training courses – in conjunction with Ain Pharmaciez – for c-store franchise owners. They will also sell food.  

“The convenience store business is franchise-based so the parent companies need to work closely with owners to maintain a level of profitability,” says Moriyama. Franchiser Seven-Eleven Japan Co. has also tied up with Fuji Xerox to offer a printing service for the iPhone and other smartphones in its food stores. The service, which looks set to be expanded to iPads, allows customers to print photos, documents and other data, via multifunction copiers at any of the company’s 13,000 7-Eleven shops in Japan. 

In the UK, Europe’s largest market for c-stores, there has been widespread exploitation of the obvious sites, of which the most popular by far are petrol station forecourts followed by smaller urban centres. Some retailers, like Marks and Spencer with its Simply Food format.

Patterns of competition are changing, notes Shane Brennan, at the UK’s Association of Convenience Stores (ACS), “as more traditionally separate retailers such as newsagents, petrol stations and cafes compete for the same customer spending on lunch and snacks. This has led to innovation across the sector as shops look more like cafes”.

He adds: “We are seeing increasing use of local shops for broader services whether that be post office tie-ups, bill payment services or cash machines. Often convenience stores are the last of the community services left as banks and post offices close.”

A major problem for UK convenience stores in the past was their inability to compete with the supermarkets on perishable food. “The supermarket convenience stores offer a selection of products available in big stores and a lot are basics, not geared up for people doing their major weekly shop. Its top-up stuff, bread and milk and so on and it’s often been difficult for small convenience stores because they don’t do the volume of business or have the speed of turnover,” says Richard Dodds of the British Retail Consortium.

In the US, convenience stores have learnt to widen product ranges as much as possible. They are no longer just a place to pick up a drink on a long drive. They have become multi-faceted businesses that allow consumers to complete a number of errands in one location: fill up with petrol, send a letter, grab a meal, or even do some laundry.

The biggest connection US convenience stores have is with the petrol industry. “Convenience stores are America’s fuelling station. They sell an estimated 80% of the country’s motor fuels,” says Jeff Lenard, vice president of communications at the National Association of Convenience Stores (NACS). 

And in the US – as elsewhere – striking up unusual partnerships can be a key to success. “Some stores also look to attract the one-stop shopper through partnerships with post offices, dry cleaners, quick service restaurants etc. The goal is to help address the time-starved customers’ one-stop shopping needs,” Lenard says.

TravelCenters of America (TA) is one such chain that sells just about everything a long-haul trucker or tourist travelling by car might need. Their 165 locations throughout America include: petrol, lorry repair and maintenance services, fast-food and full-service restaurants, showers, business services, laundry facilities, video games and convenience stores. Although they stock typical c-store food items such as snacks, the stores also have a wider selection of non-food items: books and DVDs, tool kits, electronic equipment (navigation systems and video cameras) and clothing. TA runs Cafe Express for on-the-go meal offerings, which feature sandwiches, sausages, nachos and other hot food items.

It is, however not necessary to try and fit food products with non-food partnerships, some industry watchers argue. Mike Thornbrugh, spokesman for convenience-store chain QuikTrip believes the type of food sold in his chain varies more with a particular store’s design and strategy rather than what else it offers. “Just because we sell gas [petrol] it doesn’t impact on what food we sell,” he says.

Quiktrip has 555 locations in nine US states. The company entered the fresh food business about five years ago with its QT Kitchen stores and moving forward it will continue to expand in this area. The chain sells fresh food items including sandwiches, salads, fruit cups and also makes its own fresh pastries.

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