With all of the major grocers in the UK now investing heavily in smaller format stores, RedPrairie’s EMEA Retail Industry Director John Bailey takes a look at the stock control demands of the modern convenience store.
Over the years we have seen the demand of the convenience store grow. According to the Institute of Grocery Distribution, the sector represents 20.5% of the total UK food and grocery market and will be worth £41.3 billion by 2015, an increase of 33.7% over a five-year period.
Many larger format stores are driving this growth with nearly three new Tesco Express outlets opening every week last year. It has now added 145 outlets, an annual expansion rate of more than 15 per cent, and Sainsbury’s plans to open between 50 to 100 convenience stores a year. Meanwhile, the acquisition of Netto gave Asda a ready-made portfolio of smaller format stores, and Morrisons is currently trialing its first three convenience stores.
This indicates that overall the sector is becoming more diverse & more competitive and whilst the space might be smaller, the challenges are not.
The definition of convenience is ‘the state of being able to proceed with something with little effort or difficulty’.
For the consumer, convenience shopping is about being able to pop into a local store, find the items they want to buy, pay, leave and be satisfied that the price they have paid for that convenience is justified.
Whilst this is fundamentally the same as for a large format retailer, in the c-store environment, small spaces and big customer expectations combine to amplify the challenges.
Like their bigger brothers, convenience stores want to put as much product as possible on shelves and, although they may hold a smaller number of SKUs compared to larger stores, the turnover of that inventory can be faster. And whilst some convenience retailers may deliberately limit their trading space in order to keep business rates down, in most cases, the aim is to minimise the requirement to hold inventory at the store in order to maximise the sales floor, whilst also ensuring optimum product availability.
In order to achieve this, deliveries need to be smaller, more frequent and more ‘retail-ready’ and usually need to be made by smaller vehicles in order to negotiate town centre locations. In turn, this impacts the level of detail and the frequency with which a retailer needs to plan store deliveries. In order to achieve this, real-time supply chain visibility is paramount.
Optimising fast-moving inventory across a large number of small stores is also a major challenge, especially as creating a differentiated consumer experience becomes more important.
Too much stock and/or stocking the wrong products, results in cash being tied up in inventory and waste. On the flip side, too little stock and availability causes sales to suffer.
By the same token, too many staff means that labour costs can all but cancel out profits. Too few and shelves end up empty and customers end up queuing, or simply going elsewhere.
In the past, retailers have had to rely on multiple, disparate demand streams to coordinate supply chain and in-store operations. The results are often less-than-ideal: shelves aren’t replenished quickly enough, or at all, or store systems might show more product available than what actually exists on-site, creating ‘phantom inventory.’ Putting the right product in the hands of the right people has often been a challenge.
In order to achieve the fine balance of availability, people and product quality required to compete profitably, convenience retailers are using technology to better forecast demand, thereby improving both service levels and profitability.
By operating on demand signals from actual, rather than forecast, sales information, today’s best-in-breed retail technology solutions can not only automatically trigger inventory replenishment but also ensure that the right number of staff are scheduled to support that product when it arrives at the store.
More than in any other retail segment, it is within the footprint of each convenience site that revenue is generated, costs are incurred for inventory and staff, cash flow is managed, and the battle for customer retention is won or lost.
This requires the right mix of in-store and above-store tools to automate routine tasks, provide real-time visibility to operations, and aid in effective decision-making.
Note: The views expressed here are those of John Bailey and do not necessarily represent the views of Retail Gazette.