Convenience equals growth

There are lessons to be learnt by the retail majors from the relatively new convenience store sector, as latest research reveals, most notably regarding stock levels and cleanliness in store. According to ACNielsen, manufacturers should be driving major initiatives within forecourts for limited product classes and developing categories that fit the profile of convenience and impulse buying, ie, iced tea and fast foods. In turn, a forecourt's c-store strategy should focus on driving and growing impulse and convenience products, growing fast foods and the ready-made meals business, and limiting the range of groceries stocked.

Presented by Quinton Jacobs, ACNielsen Account Director: Retail Services and Ian Hobson, ACNielsen Marketing Manager: Retail Services, the findings highlighted the strengths and weakness of this burgeoning retail sector which has seen approximately 1600 c-stores open over the past eight years. One of the main reasons given by consumers (up to 60%) who shop at garage forecourt stores is because they are pristinely clean, tidy and always in stock - some of the majors should take note here.

However, it was also found that forecourt c-stores are hopelessly overstocked, with up to 85% of their product classes accounting for less than 5% of their revenue. ACNielsen recommended that forecourt c-stores reduce stock levels significantly and focus on 15 to 20 food categories, including fast food and ready-to-eat – a growth area.

Product purchases, in order of popularity, were: snacks (including cooldrinks, chocolates, sweets and ice cream); baking goods; milk; cigarettes; newspapers and take away/ready-to-eat meals.

According to ACNielsen, manufacturers should be driving major initiatives within forecourts for limited product classes and developing categories that fit the profile of convenience and impulse buying, ie, iced tea and fast foods.

In turn, a forecourt's c-store strategy should focus on driving and growing impulse and convenience products, growing fast foods and the ready-made meals business, and limiting the range of groceries stocked.

The ACNielsen research focussed around branded forecourts where they are most concentrated: metropolitan and urban areas. Some of the main findings were:

• Of the 1254 branded forecourt stores, Engen is by far the largest c-store brand, with 413 stores nationwide.

• Supermarkets still dominate the GTC (Grocery, Toiletries, Confectionary) category however, with R30.5 million of GTC turnover going through supers, and R2.7 million through branded forecourts.

• The group of people who shop at forecourt stores are mostly LSM 7, 35 years old and earn a salary of at least R8000 a month.

• The average basket at a Forecourt convenience store is R11 to R20, compared to Supermarkets - R80 and Hypermarkets - R160.

• The reasons as to why people shop at Forecourts are the obvious, such as convenience 24-hour shopping when other shops are closed - up to 50%; safety; within walking distance; fresh bread; cleanliness.

• Only 30% visit Forecourt shops because they have stopped for petrol!

Strengths
Forecourt c-store strengths identified by ACNielsen included: the forecourt stores are good looking; site placements are convenient; customer security; 24 hour trading; other attractions such as ATM, car wash, fast food, dry cleaning, etc; service departments such as bakeries.

Weaknesses

ACNielsen has identified that most owners do not have any or little retail experience; owners experience cash flow problems - no credit; shrinkage control; limited product range potential; small basket size; little assistance on store layouts; inconsistent pricing structure; expensive franchise cost; limited back-up stock for fast turning items (promotions) and small store rooms.

Opportunities

This market needs training and assistance in customer care programmes; more focus on promotional activity; corporate brand building; comprehensive store range planograms/space utility; and the introduction of more "take home" products.

Threats

Rapid expansion of other retail brands such as Pick 'n Pay Mini Markets; U-Save; the Friendly chain, and so on; more effective corporate brand building by competitors; extensive retail experience of competitors; competitors pricing policies; competitors range policies; members' break away from franchise owners; major retailers entering franchise agreements; limited land and sites available; and the deregulation of the fuel industry.