Competing for the convenience dollar
With supermarkets continually encroaching on convenience store’s territory, those already in the industry have had to diversify their offering to stay ahead. Danielle Bowling spoke to 7-Eleven, about its strategy for success.
The convenience store industry hinges on consumer sentiment, and despite a tough few years in retail, things are looking up for operators, according to a recent report by IBISWorld.
Convenience Stores in Australia, December 2011, states that the GFC, weak income growth and increased competition from small-format grocery stores and supermarkets saw sales contract by 0.4 percent per annum over the five years to 2011-12. However the report also states that the ever-expanding range of goods offered by convenience stores, combined with the time poor, cash rich consumer, is expected to drive sales by 1.4 percent to $6.53 billion in 2011-12. And this trend will continue well into the future, with sales growth of 1.6 percent expected over the next five years, to reach $7.08 billion by 2016-17.
The world’s largest operator, franchisor and licensor of convenience stores, 7-Eleven has enjoyed an increased market share since acquiring 295 service stations from Mobil Oil Australia in May 2010. With approximately 600 stores, and 35 percent market share, 7-Eleven is the biggest player in Australia’s convenience store market.
Despite its size, 7-Eleven isn’t immune to the challenges faced by retailers in this industry, which include supermarkets’ increasingly convenient offering. IBISWorld’s report says that supermarkets’ attempt to gain a larger share of the convenience market by introducing private labels, installing self-checkouts and repositioning traditional convenience store merchandise to more accessible locations, has intensified competition.
National retail manager at 7-Eleven, Sue Owen, says one of the best ways for the franchise to compete with supermarkets and stay at the top of the game, is for its franchisees to simply follow the system. “Franchisees can position themselves for success by following the 7-Eleven system, which takes care of marketing, product range, maintenance, accounting services et cetera. By following the system, franchisees can focus their efforts on ensuring they have a perfectly presented store, which is merchandised to the highest standards and on training their staff to offer outstanding customer service,” she says.
“Convenience is about more than just the products available on shelf. Our stores have the right products in the right quantities, on the shelf when and where the customer wants them. They have good layouts that make everything easy to find so customers can get what they want quickly. They offer additional services like transport and lotto tickets, phone recharge, Moneygram and ATM facilities. Our stores are [also] in convenient locations, the majority have parking at the door and our franchisees provide efficient service so customers can get in, get what they want and then get on with their day.”
The promo point of difference
Convenience Stores in Australia lists staff friendliness, speed of service, convenience and store cleanliness as key factors determining where consumers choose to shop. It also states that promotional deals play a significant role in boosting spending, and Owen agrees.
“Our promotions and exclusive brands, Slurpee and munch, help us to keep our offer fresh and engaging for our customers, and encourage them to choose 7-Eleven as a destination,” she says.
Other than its frozen beverage Slurpee brand and munch range of meals and snacks including sandwiches, pies and muffins, 7-Eleven also has a $1 coffee offering and recently aligned itself with Krispy Kreme doughnuts.
“Our ongoing promotions and deals give our customers value and some great freebies, which increases customer traffic and helps to lift customer spend spend when they’re in-store,” Owen says.
The Slurpee brand is an extremely popular, full-time offering at 7-Eleven with sales spiking once a year when franchisees hand out free Slurpees to anyone that says ‘Happy 7-Eleven Day’ on the 7th of November. Last year was the most successful 7-Eleven Day since its inception in 2008, with 782,650 free drinks handed out.
“Slurpee is iconic and is exclusive to 7-Eleven. For customers, Slurpee isn’t something that can be substituted for another product, they want the Slurpee experience. This means our customers come to our stores every time they want to satisfy their Slurpee cravings”.
With more than 11 million Australians aged 14 and over purchasing from convenience stores in any given seven day period, it makes sense for franchisees to do all they can to promote their exclusive offerings and reinforce the fact that convenience stores offer something that supermarkets don’t.
Owen agrees. “Our franchisees are critical to the successful execution of our offer and our promotions. They make sure the products are available in the right quantities, merchandise their stores to increase customer awareness at store level and work with their staff to make them aware of all our offers and how to process them at the register. Great franchisees also work to inspire their staff to share with the customers the deals that are on offer.”
“Convenience stores are set to battle against the big supermarkets over the next five years, with the market set to experience mounting competition from supermarkets and other grocery stores in their quest for the elusive consumer shopping dollar,” the IBISWorld report reads.
At the same time, however, it says that while many argue that convenience stores charge more than supermarkets for identical products, consumers choose to shop there because of the product range, ease of service and ample parking.
“We continue to adapt over time to maintain a competitive advantage in a number of different ways, but the core is always about convenience for the customer,” Owen says.
“Convenience used to be about a range of grocery items available after grocery stores were closed, but now, for our customers, convenience is about more than just milk and bread. Though those are important, it’s about great grab-and-go fresh food, e-services products such as phone recharge and online gaming gift cards, and the continued evolution of the iconic Slurpee brand.”
With a wider and cheaper range of products, extended operating hours and often a petrol discount at the check-out, supermarkets have posed a serious threat to the convenience store market, which has had to continually evolve to ensure stores are one-stop shops for time poor consumers.
Over the years this has seen convenience stores broaden their offering while at the same time adjusting it to consumer trends, including the introduction of fresh foods like juices, yoghurts and fruit salads in response to the consumers’ growing awareness about the importance of a healthy diet.
This diversification also saw convenience stores introduce services such as ATMs, photocopying, internet shopping pick-up points, internet access, vending machines, dry-cleaning services, video rentals, lottery operations, and back in the day, film processing.
“Our stores have been successfully competing with supermarkets since trading hours began to be deregulated many years ago,” says Owen. “The key is in continuing to ensure our offer is clearly differentiated from not only the supermarkets, but also our direct competitors too. We have to ensure we keep ahead of what the consumer is looking for from convenience, to continue to evolve to meet their needs”.