This year’s ACS Local Shop Report gives fresh insight into the Scottish and UK convenience sector, with an increasing number of retailers using new technology and getting involved in their local communities.
by Émer O’Toole
In its short four year existence, the ACS Local Shop Report has become a key research study into the UK’s convenience industry. This year’s report has shown further growth in Scotland’s convenience stores and, significantly, retailers are realising that technology is the way forward if they want to stay ahead of the game.
The report shows considerable national growth with 50,747 stores in 2014, rising to 51,524 in 2015 – a net growth of over two shops per day. In Scotland there are now 5,602 (+11%) stores, an increase of 57 since last year. It is worth noting that Scotland has more shops per head than any other part of the UK with one shop for every 946 people, reclaiming the top spot that was occupied by Wales last year.
In April this year, the total sales value in the convenience sector was £37.7bn, an increase from last year’s total of £37.4bn with turnover growing by 5% over the last year. Symbol groups accounted for 41.5% of sales last year but only 38.1% of sales this year, suggesting that multiple chains and co-operatives are eating up a greater share of sales, accounting for 33.6% of total sales (a 3.6% rise since 2014).
UK convenience store owners are working harder than ever with 25% grafting away for more than 70 hours per week and 20% of shop owners taking no holiday at all.
In order to compete with supermarkets and other retailers, most convenience stores now offer a wide range of services. For instance, 38% of c-stores now have a free to use cash machine, 54% offer cash back and 80% offer mobile phone top up. In 2014, 81% of customers paid by cash but card payments are set to rise this year with contactless payment now at a £30 spending limit. Currently, just a third of retailers in the convenience sector offer contactless payment despite it being ideally suited for convenience stores and their £6.45 average basket (a 32p increase since 2014). However, convenience stores have firmly rejected self-service check outs, with only 1% having the facility, while a recent trend in convenience has been the number of stores offering a loyalty card to customers. This figure is now at 27%. The number of UK convenience stores with an alcohol license is 88%, a 1% rise from last year.
Only one quarter of UK convenience stores have a website. Similarly, the number of shops with Facebook is only at 23% and 20% for Twitter. Even though these figures are growing steadily, convenience store owners need to be more present online if they want to engage with modern consumers. Since the tobacco display ban, an increasing number of retailers have been using the space for digital advertising screens and while only 14% of retailers currently have these, the figure is set to rise. Recently, convenience stores have been attempting to get customers to stay longer and have appealed to shoppers with 7% of convenience stores having customer toilets, 5% with a seating area and 5% offering free Wi-Fi. These are just small figures at the moment but could potentially increase as c-stores invest more to compete with cafes and coffee shops.
Profits to go
Almost half (49%) of shops now offer cold food-to-go options. In order to compete with local cafés and restaurants, more retailers are starting to see the potential in selling a hot breakfast and lunch offering. A coffee machine is an obvious place to start and nearly a quarter (24%) of UK retailers offer this. Hot food to go sales have seen a significant increase over the last year with 15% of retailers having a hot food to go counter (previously 1.7%). Over the last year there has been a wider focus on ‘make it yourself’ food areas with 8% of retailers having a food preparation area which could contain toasty makers, baked potato ovens and salad bars. Additionally, 6% of shops now have a microwave where customers can heat up their food to go items in-store. Surprisingly, the number of stores with some form of refrigeration has decreased by 3% to 92%. This could be due to stores having to maximise the space available.
With these additional offerings, customers are visiting shops more frequently. In 2014, 36% of shoppers visited most days or every day and in 2015 this increased to 39%. Couples with young children is the fastest growing shopper profile- 23%, a 4% increase from last year. Like last year, the majority of shoppers (58%) are within walking distance of their local convenience store so consider distributing leaflets in the local area.
Furthermore, in recent years, c-store retailers have recognised the value in paying attention to shopping missions. The leading shopping mission is top up (40%), both planned and distressed and treat (22%). Looking at the report, the focus seems to be on making convenience stores shoppers’ main point of retail contact as demand for a diverse range of services continues to increase. The services most convenience stores now offer saves customers from going to the pharmacy, supermarket and post office as well as their local c-store. For example payment services (53%), parcel services (28%), recycling services (26%), local deliveries, online/mail to order collections (11%), car washes (6%) and prescription services (1%) are all making their mark. This is a stark difference to last year’s report where c-stores only offered a limited range of services.
Local shops are also a vital source of employment – nationally, the convenience store sector provides jobs for over 407,000 people, a 5% increase from last year. Of those jobs, 44,332 were in Scotland, an increase of 77 jobs since last year’s report, demonstrating that Scotland is recovering from the recession well.
ACS Chief Executive James Lowman believes that the report demonstrates that the sector is continuing to adapt to meet the needs of customers. “By diversifying their offering in store and the services they provide, they have firmly established themselves at the heart of their communities,” he says.”The number of jobs that our sector provides stands out once again this year, giving local jobs to people of all ages and with a range of other commitments.”
One of the most promising aspects of the report is that 83% of retailers have engaged in some form of community activity over the last year, a key tool for local retailers to increase loyalty and customer engagement. Almost one third (32%) of shops have a community notice board where jobs, adverts and community events are displayed. Like last year’s report, the majority of shoppers in Scotland are within walking distance of their local convenience store, so if you don’t already, consider distributing leaflets in the local area as well as taking part in local activities.
Examples of community involvement in the UK include collecting money for charity (78%), providing funding or support for a community event (32%), providing sponsorship to a local sports team or other community activity (21%) and community, council, or local business association meeting or project (10%). The South West of England is the most engaged region, with 90% involved in community activity but Scotland is catching up.
The report shows a positive outlook for the future of local retail. While the market still has a long way to go in terms of becoming customers’ main shopping location, new technology and resources will undoubtedly drive customer interest and engagement, the key to any successful shop.