The Co-operative Wholesale Society will rebrand its 275-strong Late Shop convenience-store chain as Welcome next month, in a move designed to retain and build share in an increasingly competitive market.
Despite the retailer being a market leader, CWS senior marketing manager Ged Carter recognises the need to strengthen the brand, as the sector comes under fire from supermarket and petrol retail heavyweights.
In the next three years, Carter plans to open 200 further Welcome-branded convenience outlets to further consolidate the retailer’s position in the market.
The Co-operative movement, which includes CWS and Co-operative Retail Services, currently holds an 8.9 per cent share in the 28bn “neighbourhood” retail market of which the Welcome brand is a significant contributor, according to retail consultant Verdict Research (see table). The “neighbourhood” sector denotes any shop where people can shop locally from their office or house. Shops average 95m2 in size.
Ever since Tesco introduced its 185m2 Express format in May 1994, petrol and supermarket retailers have sought to tap a fragmented convenience retail market, which currently lacks their sophistication and financial clout.
The Tesco Express format includes a Tesco-run petrol forecourt. The retailer currently has 15 Express outlets and plans to open three more this year.
In other cases, petrol and supermarket retailers have opted to link up. Safeway has around half a dozen small-format stores in BP stations and is believed to be planning to roll out 100 more.
Meanwhile, Tesco has recently signed an agreement to provide Esso stations with retail outlets and Somerfield is piloting five small-format stores on Elf forecourts. These were created by the Somerfield and Elf in-house teams and will roll out to 50 sites over the next 18 months.
But, as yet, these new entrants account for a minute proportion of the overall convenience sector.
“We believe that neighbourhood retailing is about to be revolutionised [in a transformation] as radical as the development of out-of-town superstores,” says a Verdict report, released late last year.
Verdict chairman Richard Hyman says: “The market is very fragmented. The big boys have only recently started to look at it, but we now expect a great deal of activity in the short- to medium-term.”
The retail heavyweights’ concentration on the convenience sector is due in part to increasing planning difficulties and the rising costs of superstore development. But this is only part of the story.
“The convenience factor is becoming increasingly important. As people become busier, they are making more frequent trips, nearer home. There are also more single-person households now,” says Enterprise IG client director Philip Hodson. Enterprise created the name and identity for the CWS Welcome brand.
Shell tapped into this trend last December, launching its first standalone Select convenience store in London’s The Strand. The 160m2 store was evolved in-house and based on the existing Select forecourt format, which Conran Design Group helped to create.
According to Shell Select format manager Jill Martin the outlet places a greater emphasis on fast and fresh food – one of the keys to a successful convenience store.
With its superior buying power and well-established brands, the new breed of convenience-store retailer looks likely to give the traditional operators a run for their money.
“There has been a mistrust of convenience stores, because they are often expensive and not great quality. The supermarkets and petrol stations can bring in better quality, wider choice and lower prices,” says Fitch creative director Tim Greenhalgh.
Fitch created the Sainsbury’s 300m2 Local convenience format launched last summer. Sainsbury’s now has two Local formats and is believed to be planning a further ten.
Verdict’s Hyman says many of the 90 000 stores comprising the convenience sector lack the breadth of the supermarket/petrol retailers. “You might get an off-licence that sells a few cigarettes, or a grocer that sells a few papers, but you need a broader expertise,” he says.
However, the move from a 3000m2 supermarket format to a 150m2 convenience format is not a straightforward translation.
“You really have to be functional with the smaller stores – good sight lines are particularly important. The design should embody the core values of the parent retailer, with perhaps a slightly younger appeal because of the younger market,” says Fitch’s Greenhalgh.
“People associate convenience with speed and it’s important to get the point across that the shopping is quick and easy,” adds Greenhalgh. Verdict’s Hyman believes the supermarkets “have yet to crack the format”.
“The existing formats do not use the space sufficiently. It’s a learning process and they are only in the early stages,” he says.
Hyman foresees the existing independents being substantially replaced by multiple retailers in the next few years and expects a concentration of shopping parades into fewer, larger outlets.
In a growing market which clearly favours the retail heavyweights, it seems the supermarkets and petrol retailers have everything to play for.