It’s that time of year when we reflect on the past twelve months, and we usually see plenty of superlatives from experts and commentators hailing the most significant change, the biggest, most profound impacts on the future. 2017, though, might just have earned the hyperbole where the convenience store sector is concerned.
Amid many important changes in our market, I would view the period we are in now as comparable to that of 2002-2004. For younger readers – and the forgetful – this was the time when convenience groups like T&S Stores, Jacksons, Bells and the Adminstore Group got bought out by Tesco and Sainsburys, and the multiples’ entry into the convenience store sector took hold.
This year, three multiple retailing groups have entered – in different ways - the wholesale market. Tesco are buying Booker, the Co-op are buying Nisa, and Morrisons are supplying McColls and some Rontec stores. We’ve also seen Palmer & Harvey close, and existing players pick up the component parts of their business with Booker winning the contract to supply Shell, Co-op agreeing a deal to supply Costcutter, and Conviviality buying Central Convenience Stores.
What can we learn from 2002-2004 that might inform our response to this wave of changes? Firstly, the entry of multiples into convenience brought a whole new set of pressures. How do you compete with a store that enjoys such significantly better buying terms, brand power and marketing scale? We have seen an overall net closure of independent convenience stores since then, but nowhere near the levels forecast at the time. The independents who have done well since then have focused on service, emphasising a point of difference in their community, and working in partnership with their symbol group and wholesalers to create relevant deals and value for the consumer.
Secondly, when we were talking to the Competition Commission about their grocery market inquiry from 2006-2008, one of the most compelling facts in favour of intervening in the market was that only the big four grocers were opening new large sites. More or less as soon as that inquiry finished, we saw the rapid growth of the discounters, who started opening up in more locations and challenging the established multiples. Everyone was focused on the big four, but actually the market changed because of new competitors in tune with, and to some extent driving changes in, customer attitudes and habits.
If I was to look at that experience as a blueprint for how symbol groups, wholesalers and retailers might respond to this year’s events, there seem to be two lessons to take: start by thinking about your business and your customers, and think about change not just in the context of mergers and acquisitions among competitors you know about, but about new entrants who might challenge the status quo. Is a multiple retailer entering wholesale your biggest threat or opportunity, or is this more likely to come from Amazon, or a company you’ve never even considered as trading in your market?
