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- What is a Convenience store?
- Who operates Convenience stores?
- How many Convenience stores are there?
- What is the market worth and how well is it performing?
- What is happening in the Convenience sector?
- What will the convenience market look like in the future?
What is a Convenience store?
For a store to be defined as a Convenience store it must satisfy three criteria:
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- Size and Opening hours: The store must be under 3,000 sq ft and open for long hours every day of the week.
- Main Business Activity: All stores must retail food and drink, for consumption off the premises, as their main business activity.
- Product Categories: A group of fifteen products have been identified as being central to the offering of a convenience store. It must sell at least eight of these core products to qualify as a “true” convenience store. The categories are:
- Alcohol
- Packaged groceries
- Bread/bakery products
- Household/non-food
- Food-to-go
- Soft drinks
- Health and Beauty
- Newspapers/magazines
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- Fruit/vegetables
- Confectionery
- Savoury snacks
- Milk/dairy
- National Lottery
- Fresh
- Tobacco
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Who operates Convenience stores?
Convenience store ownership is highly fragmented, with a large number of operators present. Store operators may be divided into several types (also known as “segments”):
- Co-operative (e.g. ,The Co-operative Group, Mid Counties Co-operative)
- Forecourts (dealer and company-owned e.g., BP, Shell, Total)
- Multiples (convenience specialists and some supermarket based chains) (e.g., Mills, Tesco Express)
- Symbols, Franchise and Fascias (e.g., SPAR, Londis, Bestway)
- Non-affiliated independents
How many Convenience stores are there?
There are 48,751 convenience stores in the UK, representing a decrease of 1.6% over 2008. The following table shows the breakdown of store numbers within each segment and the corresponding market share.
Convenience multiples remain the fastest growing part of the market, with sales increasing by 12.7%. This was driven by further portfolio expansion, the continued development of high performing store formats, and enhancements to existing stores including improved layouts and ranging.
The chart below shows the number of convenience stores by type in the UK:
Convenience store numbers
Source: IGD Research 2009
What is the market worth and how well is it performing?
The UK convenience market was valued at £29.1bn in 2009, a 6.1% increase on the previous year. The value of the market continued to grow despite a 1.6% fall in store numbers, and now represents 20.5% of the total UK food and grocery market.
The convenience market has experienced strong growth over recent years, driven by a range of lifestyle and demographic factors, along with significant improvements which have been made to the proposition including improved store formats, the increased provision of fresh foods and food-to-go, and an improved price positioning.
The chart below shows the UK convenience market value by type:
Convenience sector value
Source: IGD Research 2009
What is happening in the Convenience sector?
New formats and ranges drive sales at Co-operative stores
The number of Co-operative convenience stores has remained relatively static year-on-year at 2,416 stores, accounting for 4.8% of all UK convenience stores.
Consolidation of individual societies has continued, with the Lothian Borders and Angus Co-operative Society recently becoming part of The Co-operative Group. Improvements to store formats and the product offer, along with a more unified approach on ranging and promotions have all played an important role in the success of this sector.
However, these developments are overshadowed by The Co-operative Group’s acquisition of Somerfield, which will add over 700 stores (net of divestments) to the Co-operative Movement, which in turn elevates The Co-operative Group to be the UK’s fifth largest food and grocery retailer, with around 8% market share (Source: TNS).
Forecourt site closures slow
After several years of a decline in the number of forecourt stores in operation the UK, there was a marginal increase reported in 2009 driven by new site development, new entrants and a number of previously mothballed sites which have been re-commissioned.
One of the most notable trends in the sector is the continued divestment of company owned stores by a number of the leading oil companies in order to focus on their upstream activities. This has created opportunities for a number of forecourt retailers to expand their operations, including MRH (formerly Malthurst/Pace), Snax 24 and the Park Garage Group, benefiting the sector as a whole as many of these companies are solely focused on their store operations.
Store developments such as BP Connect/Simply Food, Esso On-the-Run and the ever increasing presence of symbol group stores in forecourt locations, had led to modern convenience formats to gain scale in the sector. We estimate that around 20% of forecourt stores are represented by such sites, helping to increase customer perceptions and expectations of the sector.
Convenience Multiples lead the way on fresh foods
Convenience multiples perform well with high store standards continuing. Supermarket retailers are achieving significant presence in this segment and now operate1,713 dedicated c-stores accounting for more than half of the segment. Their high performing, fresh food led store formats continue to make a significant contribution to overall sector growth.
Fresh food based services has a high level of penetration within this sector, outperforming all other sectors of the market. However, the penetration of food-to-go based services has only recently started to increase, with a number of operators starting to introduce a hot coffee offer.
Symbol Groups boosted by new recruits
The number of stores affiliating to a symbol group continues to grow rapidly, with just under 300 stores recruited in the latest year alone. Symbol groups offer retailers a range of benefits including strong marketing and branding, wider product ranges, and more sophisticated supply chain systems.
The majority of this growth has been driven by a number of the wholesale operators as they have sought to increase volumes going through their operations and increase the penetration of their various fascias.
Sales have been boosted by the high level of recruitment and an improving performance from existing retailers. Fresh food categories, particularly fresh fruit and vegetables, and sandwiches present an opportunity for strong growth in future years as penetration remains relatively low.
Symbol Groups Market Overview factsheet
Independents well positioned on local appeal
Independent store numbers continue to decline, although a significant proportion continue to transfer across to symbol groups. Others choose to leave the sector due to succession issues, high investment requirements or to capitalise on higher property prices, with evidence suggesting that it is the weaker performing stores typically exiting the sector.
However, the independent sector is well placed to capitalise on the issues which are gaining prominence amongst consumers, particularly in terms of ethical considerations such as sourcing, community and the environment.
What will the convenience market look like in the future?
Over the next five years, and particularly in the short-term, the convenience market will face a number of challenges as a result of the current economic downturn. In this scenario, convenience retailers will continue to be pro-active in demonstrating their own stronger value for money credentials, including introducing wider ranges of private label products, enabling budget conscious consumers to shop within convenience stores.
However, many of the factors which have supported the growth of the convenience market continue to be present, including more women at work and an increase in the number of single person households.
Furthermore, food-to-go will emerge as a major growth area within the convenience market. Convenience store retailers continue to invest in developing food-to-go ranges, attracted by the opportunity to develop a new income stream, with potentially stronger margins, and the benefit of additional footfall.
By 2014, we forecast that the value of the UK convenience market will reach at least £39.7bn. While this is ahead of previous forecasts it is boosted in particular by a high rate of food-price inflation which is expected to remain in the sector over the forecast period.
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