Convenience Stores Up or Down?

Some of you may have seen an excellent new report by the Local Data Company which discusses whether we are reaching saturation point for the number of convenience stores in UK towns. The LDC has been tracking significant increases in convenience store numbers over the past five years, but this growth is slowing, and in about a quarter of the towns they have looked at there has been a net reduction in convenience stores over the past year.  So, as someone who has a fairly strong interest in the convenience store market, ought I be worried?

Firstly, let’s just clear up some points about the LDC data, which paints a different picture to our own Local Shop Report that shows a small year on year increase in store numbers over the last five years.  The LDC are fantastic at analysing town centres, and they are visiting and logging more and more locations, including smaller towns and secondary areas, to give a very detailed picture of what types of stores are operating in those places.  However, many convenience stores operate in neighbourhoods and villages, or on petrol forecourts that will be in areas not covered by LDC researchers.  That’s why the LDC has tracked an increase to a total of 16,000 convenience stores, while the data that ACS, IGD and many others use identifies over 50,000 stores.  None of that should lead us to reject the LDC’s data, but it’s important context.

I think we should remain confident about the future of our sector, because while some areas might be seeing a decline in convenience store numbers, the fundamentals that have led to the growth in our market are still very much in place and if anything becoming more pronounced.  People are still wanting to shop locally, shop little and often, and are living less regimented lives.  This all makes convenience stores more relevant to consumers.

Yet it’s not surprising to me that in some town centres we are starting to see a reduction in store numbers.  These stores are likely to have far more trade in food to go and impulse products, and look around any major town centre and you’ll see huge competition in these categories from other convenience stores but also quick service restaurants, coffee shops, street food vendors, even the likes of Boots and other essentially non-food retailers who have invested in these areas.  There’s still massive and growing demand in these centres for this type of offer, and further growth opportunities for our sector from these products, hence the continued overall growth of convenience stores in these centres, but the competition is intense and it’s not surprising that in some centres some stores have been competed out of the market.  Also throw in the fact that these are the most expensive places for retailers to operate.

The picture on housing estates, villages and ring roads is very different, however.  Stores in these locations are best placed to meet the growing demand for top up shopping, because they are located where people live or on the way to and from work or on other journeys.  This has always been the heartland of the convenience store sector, and there’s still plenty of opportunity for growth as stores become customers’ larder and fridge, allowing them to shop locally and with minimal waste.  Increasingly, this also means providing food for immediate consumption, in some cases hot food and drink, categories that are smaller overall in these locations, but with far less local competition.

There are huge challenges facing our sector, not least the national living wage which changes the cost base of most convenience stores.  We will see businesses opening and closing, and there will be some towns that need fewer convenience than they once did.  Overall, though, convenience stores are more relevant than ever to people’s lives.

This entry was posted by Leah on Fri, 17/06/2016 - 10:36