What does the ultimately convenient supermarket look like? Like a Co-op? Like an Aldi?
Co-op delivered 3.2% lfl sales in its core convenience estate last year. Its TV advertising is all about convenience, its opening schedule of 100 stores for this year is all about convenient locations. Smaller stores can be less efficient with lower margins however, and that is something Co-op is addressing in its turnaround programme.
Aldi’s enviable growth now has the grocer as the UK’s 5th largest, having just overtaken Waitrose. Aldi is not a typical convenience store but there are elements of its proposition that fit that format: a smaller range of brand alternatives and products making the selection process far more efficient, a self-packing checkout streamlines the process cutting queuing time, and locations more convenient than some of its competitors.
Then there are the Big 4. Sainsburys and Tesco have a strong convenience estate, Morrisons has slowed the roll out of what was already a slow foray into the format and Asda has avoided convenience stores altogether. Large supermarkets are being closed and development plans shelved, all pointing towards a smaller average supermarket for the future.
The reduced space in a convenience store inevitably means a reduced range which can be a hindrance for the retailer when the customer cannot find what they need and has to go to another store. If the convenience format were able to claw back some space though, more range could be offered resulting in fewer missed sales. One drain on space are the tills themselves. What could be more convenient than not queuing to pay at all? Amazon have applied for a US and UK patent for a system that identifies the customer as they enter a store, identifies the products they carry out with them and charge them accordingly; All quite feasible given the technology that is available today.
We aren’t quite at the point where the customer is the point of sales yet but the next battleground for food retailing is convenience in our opinion. Co-op has an advantage to other retailers if it can improve its margins and refine its offer. Aldi also has an opportunity as it pinpoints the locations to extend its estate into. Both have a convenient advantage.