Small is the future!

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With its latest CTP survey results, him! has presented a positive outlook for the independent sector, but one in which retailers must fight for every pound in their till with competitors muscling in on their patch. As we enter an age of small store shopping the key is to target three stages of the shopper journey.

by Kevin Scott


When do you have to be attentive to your shopper’s needs? The obvious answer is while they’re in store, but according to this year’s Convenience Tracking Programme from him! that’s not enough. Shoppers need engaged before they shop, while they’re in-store and afterwards. When broken down this isn’t entirely a giant leap forward – what’s a leaflet drop if it isn’t targeting shoppers before they shop, but by looking at the results of the study, there are many steps retailers can take in the right direction. These three stages of shopping have been labelled ‘Pre-shop’, ‘In-shop’ and ‘Next Shop’, and we’ll be looking at how you can win in all three stages, but first, some context…

Convenience as a format has been growing in popularity through recession-born changes in customer behaviour which show no signs of abating as the economy recovers. Consumers have changed, in short. They now embrace small store formats and shun superstores (well, not entirely, come on – some artistic licence is permissible).

The ‘little and often’ concept is fast become the norm with 85% of shoppers doing a top up every week (+5% year or year), while 30% of shoppers don’t do a ‘big shop’. Plus, 19% are using a higher number of grocery retailers. This is hugely significant, as with shoppers using more stores, there’s a higher likelihood of them using your store if they don’t already.

Supermarkets are visited by 96% of shoppers over the course of any given week – impressive numbers, yes, but c-stores are on 70%, followed by discounters (43%) and forecourts (40%). Interestingly, 42% shop online for groceries every week – making this channel a bigger threat, but there is a silver lining to this: those who shop online are perhaps more likely to require top-ups.

Now, if the independents have these figures, so do the mults and discounters and that means competition in the sector is going to intensify even further, so store standards become more important than ever – but on a par with that is shopper engagement.

Small is winning

In 2010, the visit frequency for a convenience store was 3.7 times per week. This has grown modestly to 3.8 – but basket size has grown from 2.7 items to 3.0, while basket spend has grown from £5.31 to £6.39. The number of stores is also growing, which in the words of him! makes convenience the “winning growth channel”.

While many convenience retailers continue to feel the pinch of increased competition and increased savviness (and anecdotal evidence confirms that a number of stores are struggling to find growth), the CTP study reports that 40% of symbol stores have seen an increase in sales compared with 12% who said sales had decreased.

What we’re getting at here though is that the natural evolution of grocery shopping is moving towards small formats – gone is the stampede of superstore openings, and the novelty of trying a discounter. This new look marketplace has reached a level of maturity, and to thrive within it, independent stores must adapt to meet the demands of what him! calls Generation C shoppers.

Pre-shop

The industry is entering a true omnichannel age where consumers are content to shift between supermarkets, discounters and local independents. Attracting these shoppers to your store begins before they enter. We’re talking about the cornerstones of driving footfall here – the location of the store is cited as the number one driver of footfall, ahead of friendly and helpful staff, long opening hours, and reassuringly, a willingness to support their local store.

While it goes without saying that every retailer needs to continually work on every aspect, it’s worth noting that the top five footfall drivers in independents are tobacco, newspapers, milk, soft drinks and bakery, so ensure they are always as good as they can be.

According to the CTP study, getting Top Up right might just be the best business decision you make in 2015 – Top Up has been on the slide for the last five years, but a huge spike is expected this year, making 40% of missions all about Top Up – ahead of Newsagent (22% and declining), Food to go (18%) and Meal for Tonight (4%). The latter of these two may seem like small numbers, but both remain key trends and are worth £6.5bn a year combined, a total that is expected to grow to £11bn by 2020. Top Up meanwhile, which is being driven by a surge in sales of ambient grocery and fresh and chilled, is expected to hit over £20bn. Okay – those are UK wide totals, but the point is that you want to get involved in this action while it is still in early stages of growth, allowing your store to grow with it. It is far harder to board a moving train after all.

So, to summarise this Pre-shop situation, what is driving the shopper to the store – what do they want, and how can you go about providing it?

In-Shop

You’ve got the consumer through the door, now to drive their spend and increase their basket size. Way back before the western economy plummeted things were actually pretty good. It’s been a bit of a toil since then, but there’s good news – for the first time since the heady days of 2006 the average c-store basket is over three items, and that basket spend of £6.39 is the highest it’s ever been. What’s more, him! predicts that will rise to £7.69 and 3.3 items over the next five years.

One of the main opportunities highlighted in last year’s CTP report was the shopper with more than five items in their basket – that has grown from 18% to 20% over the last year, but there’s still loads of room in those baskets. Help shoppers to part with more of their cash by catering for the Top Up mission and by providing Total Meal Solutions – for example, 95% of Meal for Tonight shoppers don’t buy a dessert, so get creative with the POS. 85% of breakfast shoppers don’t buy a hot drink – have you considered a morning meal deal, or a loyalty stamp for coffee purchases? Even lunchtime has a shocker with less than half of lunch-to-go shoppers not buying a drink.

In the last two years there has been little progress in reducing the number of shoppers buying a single item. “The scope to increase the basket size of these one-item shoppers is huge and provides retailers with a significant opportunity,” says him!

Use your till area to disrupt shoppers and stir them out of their stupour. Queuing systems are in growth in symbol stores – with 44% now having such a system in place. This is ideal for enticing those one item shoppers to buy an impulse item. Have a think about increasing visibility of key impulse lines. The top three impulse categories are confectionery, crisps and soft drinks. Are you making as much of this opportunity as you can?

Again, these are not revolutionary ideas, but easy and effective methods of driving sales.

Along with interrupting shoppers why not try to inspire them too? Recipe cards, encouraging additional purchases to make a single item more appealing (such as hanging a ‘mop up your soup with crusty bread’ wobbler next to soup). Him! discovered 42% of shoppers are actively looking to be inspired.

Making the shopping experience more interesting for this Generation C shopper who is looking for a quick, convenient and fulfilling shop, is key to driving growth.

Next Shop

The final aspect of him!’s three-stage shopping plan is driving loyalty and increasing visit frequency. 11% of those surveyed said they had a favourite c-store versus 17% who said they had a favourite supermarket. On top of this, 18% said they were loyal to one or two c-stores and 29% said they were loyal to one or two supermarkets. What is happening that supermarkets are driving higher levels of loyalty? Now granted being loyal to Sainsbury’s and its many hundreds of stores compared to being loyal to a single-unit operator are very different, but the fact remains that retailers must work harder to drive loyalty.

Keep leafleting – 62% of shoppers who receive leaflets are encouraged to visit the store, and 80% of retailers believe they are effective. And yet there has been a decline in the number of retailers sending out leaflets (75% in 2013 vs 65% in 2015).

Ensure staff are friendly, helpful and well presentable. All the fundamentals must be in place to keep driving up that customer loyalty.

Technology can be used in this area too if you’re bold enough. Use beacons to text customers as they leave thanking them for the visit. This can be used on all three stages of the shop. You could take orders via mobile or internet. Loyalty programmes by their very name drive loyalty and provide you with more details on who your customers are and what they buy. We live in a connected world where 62% of all c-store shoppers own a smartphone and 12% are interested in receiving promotions and vouchers via their mobile. Take advantage!

Moving with the times is a key theme here whether that is through technology or simply following trends in convenience. The message is that no store can afford to stand still. The huge seachange in consumer behaviour is altering the very shape of the grocery industry, with convenience at its heart – led by the Top Up shop.

The last few years have undoubtedly been difficult, but through accident or design, the realignment has placed local independent retailers in a fantastic position. Taking maximum advantage of this opportunity will be hard work, but the signs are clearer than ever that this hard work will pay off.

Key findings

  • Average basket spend is growing…
  • …But one-item baskets still represent 30% of all transactions
  • Top-up mission seeing huge growth and is key for retailers
  • Fruit & Veg shoppers are increasing, now in 10% of all baskets
  • Promotions are winning: 37% of promotional shoppers bought an item on impulse
  • Basket size and number of items per basket both set to grow
  • Shoppers should be targeted pre-shop, in-store and post-shop.

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