Can the convenience sector win in a recession? New feature: Him! interview

December 1, 2009

Findings from him!'s new "Price, Value & Promotions in Convenience Study" (October 2009)
Dan Munford talks to Tom Fender, director at him!

One of the key questions I have been asking international convenience retailers over the last 12 months has been how well their business has weathered one of the most vicious downturns of recent history?

I have had some very different answers to this question but the surprising thing is that despite the premium nature of the convenience sector, some businesses in the UK have been doing very well. So well in fact that they have in some cases told me that they are slightly embarrassed to talk too loudly about their results.

So when him! showed Global Convenience Store Focus the results of a specially commissioned investigation into UK shoppers' perceptions on price, value & promotions I was very interested to find out what the realities were for the UK c-store sector. And the advice him! could offer to retailers.

In October this year, him! interviewed 1,700 convenience store shoppers exiting from 18 different UK c-store chains including Tesco Express, Sainsbury's Local, Spar, Premier, Budgens, BP, Exxon Mobil and the Co-operative Group.

Backing up individual business results I have been seeing, the him! research reports that UK c-stores were getting more customers and also getting more spend from customers this autumn than they had been in spring 2009.

The him! survey showed that despite the recession, 500,000 more British shoppers were shopping in c-stores every week in October, compared to six months before. It also showed that 19% of c-shoppers said they were spending more in c-stores versus six months previously (versus only 9% of shoppers who say they're spending less.)

So Tom, why has the UK done better through the recession than some other global markets?

"Fresh has been one recession beater for the UK convenience sector. Our research findings seem to indicate that the UK c-store sector needs to continue to do the things it is especially good at. One key area is to provide more 'value for money' for shoppers through provision of an improving core 'fresh' offer.

"This has been a part of a more successful strategy than concentrating entirely on price as supermarkets are able to, or entrenching back to a confectionery, tobacco and news offer as had happened in some other international markets."

Are shoppers still prepared to pay a price premium in UK c-stores?

"Shoppers are still prepared to pay a price premium in c-stores over supermarket prices: 14% on average - however this is slightly lower than in previous years. Shoppers think they pay a little more than their acceptable 14% price premium. However, many shoppers say they don't know the price of items in convenience stores, nor do they check prices. But retailers still have more to do on price perception. They have to ask themselves - how do we improve the sector's price image further?

Can you suggest a strategy for improving price image in-store?

"Retailers need to focus on promotions, rounded price points and price marked packs. Shoppers now need to see more promotions in store because most shoppers think they improve the price image of a c-store, even though a third say the promotions offered in c-stores are not relevant to them.

"They also like rounded price points - 34% of shoppers are encouraged to buy them vs. 8% that aren't. And customers say that they help keep track of what they're spending in-store and help get rid of loose change.

"Lastly, price marked packs are more important too. 38% of shoppers are encouraged to buy them vs. 6% that aren't. Customers are telling us that PMPs give them the reassurance that they're not being over-charged.

"And actually, there are many shoppers who think convenience stores are not more expensive than supermarkets - but remember there is no price difference in news, lottery, magazines

"What are the inhibitors stopping shoppers spending more?"

"When asked, 65% of shoppers say they don't buy more of their groceries in the local convenience store because there is not enough choice.

"A further 51% say it is too expensive, 46% because it doesn't offer the right range, 25% as there are not as many promotions and 17% because they don't offer fresh.

So price isn't everything?

"Price/value has become more important to convenience shoppers, but only 20% of shoppers say that price/value is the most important thing. The majority of convenience shoppers think their c-store is staying competitive in the current environment. 80% of convenience store shoppers say price isn't the most important thing to them when shopping in c-stores.

"However, 20% of shoppers say they are 'scrimping' in c-stores (i.e. buying the cheapest possible options). You'll be surprised when you find out which products they're scrimping on.

"Many who bought items on promotion don't know how much money they've saved. Often it's the 'treatment' a promoted line gets in-store which generates sales, rather than the promotion per se. 22% of all promotion sales would not have happened if the product wasn't on promotion.

"When store staff up-sell a product on promotion, sales are three times higher than when they don't up-sell it. There's plenty of opportunity for this. Shoppers visit c-stores 3.6 times per week on average - so a three-weekly promotion cycle means customers could see promoted lines 10+ times before they change."

For more information on him!'s Price, Value and Promotions in Convenience report contact Katy Moses on +44 (0) 7912 71 7567 and quote 'Global Convenience Store Focus' or visit www.him.uk.com