Convenience Retailing Market Overview

- What is a convenience store?
- Who operates convenience stores?
- How many convenience stores are there?
- What is the sector worth and how well is it performing?
- What is happening in the convenience sector?

What is a convenience store?

For a store to be defined as a convenience store it must satisfy three criteria:

1. Size: The store must be under 3,000 sq ft
2. Opening hours: It must not be subject to restricted opening hours under the Sunday Trading Act
3. Product Categories: It should stock at least seven of the following core categories:

Who operates convenience stores?

The convenience sector is divided into five segments according to the type of ownership:

• Co-operatives (eg The Co-operative Group, The Southern Co-operative)
• Convenience forecourts
• Convenience multiples (convenience specialists and some supermarket based chains, eg Tesco Express, Sainsbury’s Local and McColls)
• Symbol groups (eg SPAR, Londis, Premier)
• Non-affiliated independents

How many convenience stores are there?

The total number of convenience stores remains in decline. At the end of April 2012 there were 47,145 in total in the UK, representing a year-on-year decrease of 0.7%.

IGD research shows that convenience multiples were the fastest growing part of the convenience sector and are now worth £5.6 billion a year in sales, up 9.6% year-on-year. However in terms of store numbers, they only represent 6.2% of the convenience market.

The chart below shows the number of convenience stores by type in the UK: 

Convenience store numbers

N.B. Forecourt joint ventures are sites operated jointly by an oil company and a retailer. These are subtracted from the total to avoid double counting 
Source: IGD Research, 2012 

What is the sector worth and how well is it performing?

UK convenience stores generated total sales of £33.9 billion in the 12 months to April 2012, a 4.6% increase on the previous year. Convenience now represents 20.8% of the total UK food and beverage retail market.

Many of the factors that have fuelled growth in the sector in recent years continue to play a role. These include structural changes, such as smaller households and longer working hours, which are altering shopper habits and helping to drive convenience sales. Many shoppers now favour a ‘little and often’ approach to grocery shopping.

Building value perception, increasing loyalty, improving store standards and developing ranges are additional factors contributing to the growth of the convenience sector. Increasingly convenience stores are attracting shoppers who find the segment’s ability to meet their short term grocery needs suits their lifestyle.

The chart below breaks down the value of the UK convenience market by segment (in £billions): 

Convenience sector value

Source: IGD Research, 2012

What is happening in the convenience sector?

Co-operatives

2011/12 was a solid period for the Co-operative movement as a whole, with store numbers up by more than 100 (+5.3%). By value, it is the smallest part of the convenience sector. But it is an important element, combining broad coverage with strong local credentials.

Investment in systems and infrastructure should support long-term growth across the movement in years to come. But short-term there are many opportunities for suppliers to be aware of in terms of online, digital and local development that could help to drive the sales line.

Convenience forecourts

The long term decline in forecourt numbers persists.

Despite sales at forecourt stores actually seeing a small increase in the 12 months to April 2011, sales to April 2012 saw a decrease of 2.4%.

Convenience multiples

Store numbers have continued to rise in this segment, with Tesco Express and Sainsbury’s Local both displaying impressive estate growth.

New entrants continue to be attracted into convenience, with existing grocery retailers in particular seeking to further segment their store estates to tap into the growth in convenience spend. For example Morrisons has launched its first convenience stores under the M-Local fascia and announced ambitious growth plans.

Convenience multiples continue to generate the highest amount of sales per store.

Symbol groups

Many of the leading symbol groups reported another solid year of recruitment in 2011/2012 and total segment store numbers rose by 5.2%. This was driven by non-affiliated independents recognising the advantages of symbol membership, as well as increased promotional activity, range developments and maturing sales from those stores that transferred into symbol groups three to four years ago.

Delivering improved value for money has been a key focus for the sector and in 2011/2012 there was extensive private label development, backed by promotional campaigns, in order to drive down costs for shoppers. Symbol group packages continue to strengthen, with head office support growing and providing additional tools and solutions for retailers to adapt to the key trends affecting the convenience sector.

Non-affiliated independents

The number of non-affiliated independents continues to fall, with the total number of stores in this segment declining by 4.5% in the 12 months to the end of April 2012. Although store numbers in this segment are in long-term decline, the non-affiliated independent store segment still accounts for more than a third of all UK convenience stores, and so remains an important route to market for many businesses.

While sales within this segment face continued pressure, many retailers have been able to deliver strong sales growth by responding to local shoppers' needs and positioning their stores at the heart of the communities in which they operate.