After the Euros, the Olympics, the Jubilee how could 2013 possibly top 2012? A steady economy would be a start, and as Scotland gears up for what could be a watershed year for convenience we speak to a number of well-known industry faces to discover their thoughts on the next 12 months.
by Kevin Scott
There’s not a roller coaster in the world that could accurately replicate the year that convenience retail has had. There have been highs and lows like never before, and it’s left the industry looking ahead to 2013 with as much trepidation as optimism.
It’s best to start with the downside though, and finish on a high, and there’s no downside quite like the economy. We may have emerged from recession, but economists have predicated an unprecedented triple-dip next year. This may not effect a single consumers’ decision on whether to buy a chocolate bar or not, but the longer we continue to trudge through this economic mire, the harder it is to make businesses work better.
Moving closer into the convenience world and Scottish retail was rocked in January when the Co-op acquired the David Sands business. As one of Scotland’s best independent retailers, the sale of Sands’ 28 stores was a major event and served as a reminder that unaffiliated stores face an uncertain future as bigger chains look to grow their convenience businesses – from the Co-op through to the multiples, which seem to be buying up every second site on Scotland’s high streets at the moment. That’s a trend that’s set to continue and retailers must work harder to differentiate themselves and offer what multiples can’t.
Symbol groups continued to diversify in 2012, opening new fascias to cater for different types of stores and that will continue in 2013 and the overall standard of convenience stores gets better. This is certainly a good thing for the industry, and a good time to get more positive about what’s to come. Let’s not forget that convenience is in the ascendency – stores numbers are on the up, basket spend across the UK is up 15% and 86% of consumer believe they get a better service in locally.
If that’s not a platform to build on, then what is? It won’t be easy. Of course not. Getting funding for expansion is difficult, and there are a number of unknowns that are set to dominate 2013 – starting with tobacco. In the legal world the Scottish Government may have backed down on its insistence that the tobacco display ban sales area would be 120 sq cm (even now, almost a year on, the original plan still seems so objectionable it was as if the Government was going out of its way to close down convenience stores), but the current size of 1,000 sq cm remains 50% smaller than in England, however thanks to the current legal challenge, the ban is not yet in force. This is something that will surely be resolved in 2013, and so larger stores will go dark, and convenience stores will do their utmost to win sales until April 2015, when that window slams shut.
Then we’ve got minimum pricing to contend with. Even in a decade’s time there will still likely be a debate over whether or not it’s a good thing, but barring a legal challenge like the tobacco one, this time next year retailers prices will be determined to a certain extent by the Government – perhaps it will make c-store pricing more compatible with supermarkets? Perhaps it will make yet more people visit their local shop. This could yet be a positive turn of events.
Here at SLR we firmly believe that convenience retailers stand a strong chance of leaving 2013 in a better shape than they start it. By taking advantage of trends in fresh and chilled and food-to-go, by harnessing technology both in-store and in the marketing of their business, by continuing to give great service, c-stores can do great things. As ever, we’ll be here to do what we can to help you make more of your business, but before all that, over the next few pages, we reveal the thoughts of some key industry figures from across convenience, to get a wide ranging array of views.
Mark Baird, Head of Industry Affairs & Alcohol Policy, Diageo GB
Let’s hope that 2013 is a legislation free year for Scotland as far as alcohol is concerned – and that includes minimum pricing! At the time of writing, the legislation is tied up in the courts; in both Scotland and Brussels, which is where it deserves to be rather than forcing our already hard pressed shoppers to pay considerably more for their occasional tipple.
The Government’s own figures tell us that 73% of all alcohol in the off-trade will rise in price overnight if minimum pricing comes in, affecting the vast majority of shoppers. That means that 92% of vodka, 72% of whisky, 77% of beer and 63% of wine will all be more expensive, and try explaining to your customers that it’s not your fault you’ve had to put all the prices up! Oh, and remember we said last year that a ban on multibuy discounts wouldn’t affect sales; well guess what? – it didn’t and that’s according to an official Government report. Happy 2013.
Sandy Wilkie, Marketing Director, müller Wiseman Dairies
A key part of Müller Wiseman Dairies success has been our ‘Regional Range’, a portfolio of regional brands which helped our customers in the convenience sector meet the increasing consumer led demand for produce with provenance.
By offering milk which clearly identifies its source, the company are adding value to their Wiseman milk which can be passed onto consumers. We believe this demand will continue to increase into next year .
Beyond that, research tells us that consumers are continuing to actively look for local produce which explains where it has been sourced – they want value and values.
The convenience sector is increasingly focusing on the provenance and sourcing of its products, and our regional labels help to satisfy this consumer led demand in the market.
Philippe Rondepierre, Sales Controller, CJ Lang
If anyone was looking for positive signs, talks of a triple dip resulting from a recent downgrading of the UK’s growth forecast by Mervyn King, the fact that unemployment is at its highest since 1995 and the 900+ chain store closures since the start of the year should temper the enthusiasm of the most positive of analysts. Only a fool, however well meaning, could confidently forecast a strong recovery in the next 12 months.
I could, once again, talk about value and fresh foods, as I do every time I get a chance. Call me the “two tricks poney”! Of course, they remain the key battlegrounds and, thankfully, there are real signs that Scottish convenience retailers are trying hard to make up for lost years in order to catch up with the supermarkets’s convenience stores who continue to dominate in those stakes.
But as the popularity of The X Factor deservedly continues to dwindle, perhaps it is time for us to adopt the phrase and make it the key ingredient for most of us to survive, and the best of us to thrive, in these difficult trading conditions.
Perfect store implementation (nothing short of it will do for discerning shoppers with options), real community engagement (not just the annual giving away of a set of strips for your local football team) and excellent service from staff who look like they care about their local shoppers will keep us safe.Your success depends on your reaction and on your ability to be better than guy next door, whatever the fascia above his or her door. Giving you store the X Factor needs not cost you your pension fund. On the contrary, it may well help you preserve it.
John Drummond, Chief Executive, SGF
There is no doubt that 2012 has been one of the toughest years since convenience stores began to develop seriously in the late 1970s and 80s.
I am only surprised that we haven’t seen store closures that have afflicted some High Street retail fascias.
It’s to the great credit of the quality, high standard convenience stores that they have retained the bulk of their business in the face of adverse economic conditions with consumers tightening their purse strings as living costs increase.
The outlook for 2013 is no brighter with the majority of economic forecasts predicting low or no growth for the national economy.
Could this mean closures for the convenience sector? It has been suggested that the large multiples are suspending major store developments and concentrating on increasing their numbers of convenience stores in town centre and peripheral sites. This will undoubtedly increase the pressure on the independent c-store sector.
If there are to be closures, it will surely be in the non-aligned sector, the stores that do not belong to a professional and progressive symbol group, those whose standards are less than acceptable, and frankly, give convenience stores a bad name.
It’s almost inevitable for some store closures to occur during the next 12 months and maybe the net result for those remaining will be a stronger, more resilient independent convenience store sector emerging to provide the best of retail store standards at the heart of communities across Scotland.
Jeremy Blackburn, Head of Communications, JTI
We expect to see a continuation of the stunning performance of the Roll Your Own category while in the cigarette market the mid-price and the value sectors continue to grow.
In 2013 some smokers will be tempted to stray into the illegal market due to the high price of tobacco and we have seen an alarming rise in the volume of non-UK duty paid (NUKDP) cigarettes, up from 7.1% in 2011 to 10.5% in 2012. This is a major concern going into 2013, especially with the Government indicating that it intends to impose further above-inflation tax increases in the next Budget. NUKDP consumption affects retailers who lose out on the profits from the sale of tobacco and additional items too, while other Government proposals, such as the introduction of plain packaging, would only make matters worse. It is possible, however, for retailers to help fight the illegal trade in tobacco by calling the Customs hotline on 0800 59 5000 if they are aware of or know of anyone selling illegal tobacco.
James Bielby, Chief Executive, Federation of Wholesale Distributors
My top tip for 2013 is to make sure you’re getting the most out of your relationship with your wholesaler. Whether you’re a regular visitor to the cash and carry or get your deliveries direct as part of a symbol group, the partnership with your wholesalers should be much deeper than just products and prices.
FWD members offer you business advice, merchandising help, sales data and category trends, and their own insight and experience. They’ll help you ensure your store is perfectly aligned with your customer base and will give you access to technology and credit which you would struggle to achieve on your own. The close relationship with independent retailers means that our members’ success is dependent on yours, and that’s why they are offering themselves as your business partner, rather than just a source of products.
Paul Seenan, Customer Marketing Manager, Maxxium UK
We have seen a very solid performance to date this year across our portfolio at +7% (volume) which outperforms the total off-trade figure of -2.2%. This has come from a focus on our core business, with new launches delivering incremental volume to our business and that of our customers
With the convenience sector predicted to grow its value at 5.1% year on year, the biggest challenge is competition from the multiples. The independent retailer cannot afford to stay still and should be willing to adapt and create their own point of difference for the consumer. We are eager to work in partnership with our customers in 2013 and beyond to ensure that the convenience sector meets this challenge.
