Australian convenience stores upbeat for 2010

Shopping at convenience stores is entrenched in the Australian way of life and retailers are confident of growth in 2010, according to the latest Australasian Association of Convenience Stores (AACS) State of Industry Report.

However, despite the positive outlook for 2010, high staff turnover is a concern for the sector.

The report, based on general perceptions, financial and store metrics and category data from petrol and convenience industry retailers, reveals business confidence is soaring among convenience store owners.

It shows that 66% of operators are confident of achieving growth in 2010.

Many credit the Government’s economic stimulus package as playing a key role in this; with 89% regarding it a success.

The report reveals solid growth in merchandise sales in convenience stores, up 8.1%.

Most product categories have grown, with Australians buying 6% more of their groceries at convenience stores.

Soft drinks and food enjoyed similar growth with energy and sports drinks continuing to grow strongly, up 17% and accounting for 6.4% of all merchandise sales. Water and health and beauty products also performed strongly. According to the report, these categories are gradually replacing tobacco as drivers of convenience store growth and profitability.

Sheryle Moon, executive director of the AACS, said the increase in sales and variety of products shows shopping at convenience stores is now entrenched in the Australian way of life.

“With a convenience store for every 1,500 people, nearly every Australian stops at one. They pop in on the way home from work or school; they increasingly grab a morning coffee, a lunchtime wrap or an afternoon snack, so the variety of the product offering in convenience stores needs to reflect this. The growth in food services, particularly fresh bakery and coffee, indicates busy Australians are eating on the run and convenience stores are helping to service this need,” said Moon.

The increase in grocery sales suggests consumers are changing their buying habits away from the large, fortnightly supermarket shop to a more frequent, smaller basket of goods with a top-up shop, said Moon. This is particularly true in the inner-city and in single people or couple households, and has seen the average transaction value continue to rise.

Another emerging trend is a reduction in impulse shopping. Nearly 80% of shoppers knew exactly what they were purchasing in store and for the first time actual spend was in line with intended spend. According to the AACS, this suggests shoppers are planning their trips and are more value conscious due to economic uncertainty.

There has also been a decrease in the cost of stolen petrol, drive-offs returning to a ‘normal’ level of around $90 a week, down from $520 in 2008. However consumers are still trying to stretch their dollar as far as possible, waiting longer to fill up and with more fuel per occasion, the average fuel transaction is up 30% from 27 to 35 litres.

Despite the clear increase in confidence, 2009 was far from pain free for convenience store operators.

“Some 78% of our members believe the economic impact has negatively affected sales, while 66% think the price of petrol is reducing the spend on other in store items,” said Moon. “And while most operators regarded the stimulus as a success, the majority feel the Government could do more to support them, particularly with regard to the hyper-regulation that affects all products offered and activities undertaken in convenience stores, such as onerous tobacco and point of sale compliance.”

Staffing was another area that posed a particular challenge in 2009, with a turnover of 36% among the industry’s 150,000 employees. As a result, 78 % of AACS members said finding suitable staff is a key concern for their businesses.

Moon said the challenges presented by the global financial crisis had resulted in 46 AACS convenience stores closing in 2009. However, the opening of a further 51 new stores in the same period was further evidence of the industry’s positive outlook.

Key findings:

• More Australians are being served more frequently in convenience stores, leading to increased sales, but profit margins of the retailers have fallen for the second consecutive year
• Convenience shoppers spent more on merchandise, up 8.1% from 2008
• Food service is a growth area, particularly fresh bakery (up 7%) and coffee (up 8%)
• Other strong performing categories included the energy drinks (up 17%), water (up 15%) and health and beauty products (up 11%)
• Fuel sales were slightly ahead of 2008, up 2.5%
• Increase in fuel bought per transaction, up from 27 to 35 litres
• Average fuel sold per year per store continued five year downward trajectory
• Aggressive promotional activity showed consumers value for money is on offer
• ‘Busy Providers’ main shopper served by convenience store at 30% of total
• Impulse shopping has reduced; 80% knew what they were purchasing
• Failed purchases consistent at 5%
• 66% of retailers are confident of achieving business growth in 2010
• 89% agree the stimulus package had a positive impact
• 78% believe the economic situation is negatively affecting sales
• 78% agree it is hard to find suitable staff
• Average turnover of staff per annum is 36%
• 66% believe the Government should be doing more to support the industry
• 78% value advice and information from manufacturers
• 55% say they are working more collaboratively with suppliers than they used to
• Retailers would recommend industry to others
• Operators are embracing new technologies, improving B2B operations