Tesco's One Stop targets 75 new stores as customer numbers grow

One Stop, the convenience chain acquired by Tesco in 2003, is expanding as it aims to be 'best in neighbourhood', offering value for money and fast and friendly service. Fiona Briggs talks to One Stop CEO David Turner.

Tesco, the UK's largest grocer and fourth largest global retailer (see Deloitte report), is rarely out of the spotlight. One Stop, the convenience chain it acquired when it bought T&S Stores in 2003, manages to keep under the radar and, in doing so, is quietly expanding.

While the business is nowhere near the size it was when Tesco pounced - around 400 One Stop stores were converted to the Tesco Express format - it is increasing its store numbers. In 2009, One Stop opened 15 new stores and is now a 517-strong convenience chain.

One Stop: best in neighbourhood

According to CEO David Turner, more stores are in the pipeline over the next three years.

"We plan to open between 20-25 stores per year," he says.

And there is no limit on further expansion either.

"I have never thought about there being an optimum size for the chain," he says. "We keep our business processes simple so we can cope with more stores without increasing unnecessary overheads."

The One Stop portfolio extends through England and Wales and there is definite room for growth, says Turner.

"There are many areas/towns were we do not have any stores. Basically, we would open anywhere there is enough demand and we can fulfill customers' needs."

In a crowded c-store market, One Stop has the heritage and stand out to make new store openings pay.

"We aim to be 'best in neighbourhood'," says Turner. "Our stores are generally smaller than other c-stores but we pack a lot into the space, offering a good range of products. Customers tell us they appreciate our value for money and speedy and friendly service."

In addition to the new openings, forecourt stores at Tesco superstore sites in Dudley and Cannock have been converted to the One Stop format in a trial.

While press reports suggest a national roll out of the One Stop fascia could be on the cards, Turner says it is premature to report at this stage.

"The petrol kiosk is just a small trial to see if we can offer a better customer proposition and is too early to draw any conclusions," he says.

In the meantime, One Stop has been busy updating the existing estate. Turner says the company has recently completed refreshing all stores over three years old, updating fixtures and fittings plus back of house as well as looking at space allocation by category. "This has led to having a more modern environment and improved ranges for customers," he says.

It is paying dividends. Sales in the year to 28 February 2009 were £499m, a 10% increase on the previous year and well above the industry average. One Stop's growth continues apace, says Turner.

"We listen to our customers and build our business plans around these needs. We have attracted more customers who in turn have increased their spend with us. Improving availability of product has been at the heart of our performance.

"Our Christmas performance was also ahead of plan and the poor weather helped local trade generally."

While there is no denying the market has got tougher, Turner is upbeat.

"Trade has been resilient and we are performing where we anticipated to be," he says. "Customer expectations have certainly risen during 2009 and rising unemployment and taxation are areas that can affect disposable income. We still expect to grow volume and value in 2010."

Positioned as a neighbourhood store, One Stop competes with a range of outlets dependent on locality.

"Because our stores are in all kinds of different areas with unique circumstances we do not see any one or group of competitors as key. We just aim to provide a great offer than meets the local customer needs," says Turner.

But value remains key in today's marketplace and is a central thread in One Stop's strategy.

"Customers particularly like half price and bogof deals and they play their part in driving the business, along with good availability," says Turner.

Consumers are shopping around, however.

"There is evidence to show some customers are more likely to shop at different retailers for different promotions," he says. "Value for money is always important for customers in the c-store environment and expectations of price they are prepared to pay versus superstores has certainly been heightened during this recession."

In 2010 low prices and promotions will be, "very important, particularly as customers are feeling the pinch", he adds.

Keeping current in respect of the product offer and ensuring it is always available are key themes at One Stop too.

"We have improved our grocery and fresh ranges in particular and our sales mix has become stronger in these areas versus traditional CTN categories," reports Turner.

"We refresh broadly 20-plus categories every year and take account of market trends, new products and changing customer needs."

The trend to private label, which has spread from supermarkets to convenience stores, has not escaped One Stop either.

It offers around 50 own label products spanning grocery, household, chilled and fresh.

"We will continue to review the opportunity for own label and also look at other brands that play a part in improving price perception," says Turner.

Services including ATM, E-Top Up and a range of bill payment services along with cash back are a fundamental part of the mix.

"They are an important, integral part of our customer offer in all stores, including those with a Post Office," says Turner.

At an operational level, One Stop has invested in a new warehouse management system, merchandising system and has updated touch screen technology in stores. Turner reports the company is also looking at improvements in the way it communicates to stores via intranet.

Strong customer service is another hallmark of the One Stop chain, according to Turner.

"[It's] the most important, along with availability of product - we measure our performance in these areas through regular customer feedback. It is a strength of our business," he says.

Turner reports the company invests in staff training and management development and in improving pay and benefits - all of which have resulted in more satisfied staff and lower labour turnover. One Stop also incentivises managers and rewards good performance.

The chain promotes its local credentials with community-based initiatives such as supporting local charities and liaising with local groups and councils.

It claims to be socially accountable too.

"We are a responsible trader and have a dedicated team to help support the stores in this respect," says Turner. "We have many initiatives around being a good neighbour and we are currently investing in new equipment to reduce energy consumption in the stores and reduce our carbon footprint."

As for the new decade?

"No big changes in direction for us - we will continue to listen to customers and be quick to respond to their needs whilst improving and simplifying our operations and investing in store training and development for our people," says Turner.

Non stop One Stop then.

Services are key