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Can convenience save the high street?


Whilst there are few signs of optimism for the wider retail industry at present, one sector is proving resiliently popular with consumers and traders alike.

Convenience store formats have been truly embraced by the grocery sector’s main players and it is easy to see why the likes of Tesco, Sainsbury’s, Morrisons and Waitrose are all looking to expand in this direction.

An increasing number of consumers are time-poor and reluctant to commit lump sums of money to the weekly ‘big shop’, preferring instead to break down food shopping into smaller more regular visits.

So as many high streets struggle with high vacancy rates and dimishing consumer interest, could more convenience stores in local locations help boost high street trading?

The level of local opposition to many development plans proposed by the likes of Tesco and Asda may suggest that this idea would not be universally popular, but it may be effective.

Rob Cushen, Head of Retail for research company YouGov, told Retail Gazette that although growing in popularity generally in the UK, smaller formats are successful in particular with a certain type of consumer.

Cushen said: “What convenience stores are doing very well is positioning themselves with a younger shopper.

“They are attracting the 25 to 35 years demographic better than out-of-town stores because their offer resonates well with that young urban lifestyle of working late and picking up goods in town on the way home.”

Research conducted by YouGov last year showed that 60 per cent of main grocery shoppers used local shops at least once a week, with young adults the most likely to visit these shops several times in a seven-day period.

According to YouGov data, milk is the most popular purchase at convenience stores, featuring in 68 per cent of all purchases, followed closely by bread and newspapers, but even though basket sizes are small the types of supplementary products purchased varies greatly.

This variety is a key to the convenience sectors success. In weekly shops people tend to purchase the same products and scrutinise prices carefully to ensure the best deal whereas in an impromptu visit to Tesco Express the shopper is more likely to impulse buy and buy more expensive branded goods.

Cushen agrees that consumers tend to spend less in total at convenience stores but more on each individual product, which of course is excellent for the retailer’s margins.

“If you look at the people who are shopping at these types of stores, they are willing to put a premium on convenience over price,” Cushen adds.

It is little wonder then that all of the major supermarkets have looked to increase their market share in convenience trading over the last few years, with even Asda, which has its heritage in just creating large out-of-town behemoths, purchasing ex-Netto stores to move into urban areas.

Even Waitrose is now starting to experiment with convenience stores
Even Waitrose is now starting to experiment with convenience stores

Tesco increased its number of Express format stores by 1,000 outlets in 2009 alone according to YouGov and the entry into the market by Morrisons and Waitrose this year and the continued expansion of Sainsbury’s Local stores, show that all the main supermarkets now accept that small formats can be a big driver of retail traffic.

But this popularity in local shopping does not just have to benefit the grocers, and Jon De Mello, Head of Retail Consultancy at international real estate firm CB Richard Ellis, argues that “in town centres convenience stores can be a real force for good”.

“Supermarkets are picking up a lot of slack in the smaller high streets by introducing smaller formats and creating jobs in markets which would otherwise be destitute.

“If there is a gap in their portfolio they will try and fill it with convenience stores and often grocers will open a store right next to a competitor just to steal market share even if the operation is not that profitable.”

The question is whether the major supermarkets would want to move on to all of the smaller and medium-sized high streets in the near future, considering the dismal rates of footfall and occupancy of so many.

Analysis from the Local Data Company published today shows vacancy rates remained at 14.5 per cent nationally during the first half of 2011 however many small or medium-sized centres around the country, particularly outside of the south, currently have over a quarter of their shops lying empty.

De Mello said: “When retailers are looking for store locations some say that they want it to be in the top 100 retail centres and other if they are slightly ubiquitous say the top 300 but hardly anybody says they want to be in a top 1,000 centre.”

A vicious cycle of retailers either failing or staying away from high streets due to poor footfall, which in turn leads to a lack of retailers, which then causes footfall to drop even further, could theoretically be broken if more grocers took a chance with the convenience format in smaller towns, according to Cushen.

“It is a risk on the grocer’s part, and that is why you have not seen too many, but if it worked I think it would have a multipler affect on the small high street,” he said.

That is only likely to happen once all other growth opportunities, which have been proven to work, have been exhausted, and in the meantime De Mello argues that it would make far more sense to fill many unused shops on failing high streets with much needed housing.

De Mello explained: “Of top 1,000 retail centres in the country by size, the top 50 are moving away from the pack and the rest are falling further behind.

“The bottom 25 per cent of these have very high vacancy rates and would benefit from repositioning some of their commercial units into residential use.”

Convenience shopping may not come to the rescue of many struggling town centres in time for Mary Portas’ imminent government review but it could be an option in the future.

The question is whether more housing and more Tesco Express stores are the answer people are looking for when they ask: what is to be done with the British high street?

Published on Tuesday 13 September by Editorial Assistant

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