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Convenience Stores - UK - April 2017

OVERVIEW
What you need to know
Products covered in this Report
EXECUTIVE SUMMARY
The market
Convenience grows just ahead of the overall market
Figure 1: Convenience store market size, including VAT, 2011-21
Are tougher times ahead?
Figure 2: Average weekly earnings growth vs CPIH inflation, January 2014-March 2017
Companies and brands
Co-op leads the market
Figure 3: Leading convenience operators’ estimated market shares, 2016
Symbols give over more space to non-foods…
Figure 4: Convenience stores: space allocation estimates, March 2017
…which means a higher proportion of revenue comes from non-food
Figure 5: Leading convenience stores, estimated proportion of sales, by broad product category, 2016
The consumer
Top-ups still driving c-store use
Figure 6: Where consumers shop, by how they shop, February 2017
Younger consumers the driver of the c-store market
Figure 7: Convenience store shoppers, by type of shopping completed and age, February 2017
Tesco out in front
Figure 8: Convenience retailers used regularly, February 2017
A third buy their lunch and a fifth their breakfast from c-stores
Figure 9: Shopping missions regularly completed in convenience stores, February 2017
Over three quarters use non-retail services
Figure 10: Non-retail services regularly used in convenience stores, February 2017
Users would most like to see improvements in price, availability and range of fresh produce
Figure 11: What c-store shoppers would change about where they shop, any rank, February 2017
Will inflation hurt the sector?
Figure 12: Attitudes towards shopping in convenience stores, February 2017
What we think
ISSUES AND INSIGHTS
What does rising inflation mean for the convenience sector?
The facts
The implications
What does Booker and Tesco joining forces mean?
The facts
The implications
Is online turning from friend to foe?
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Convenience grows just ahead of the overall market
Convenience stores account for a quarter of all grocery retail sales
Are tougher times ahead?
Renting remains high
MARKET SIZE AND FORECAST
The convenience store sector
Figure 13: Convenience store market size, including VAT, 2011-21
Figure 14: Total convenience store market size (including VAT), at current and constant (2016) prices, 2011-21
How the grocery sector breaks down
Figure 15: Estimated breakdown of sector sales, by channel, 2012-17
What is a ‘Convenience store’?
Superstores
The needs ‘convenience’ serves
Discounters
Who do the discounters compete against?
Figure 16: Where consumers shop, by how they shop, February 2017
Forecast methodology
MARKET DRIVERS
Food retailers underperforming
Figure 17: Retail sales growth, all retail and food retail, value and volume, January 2015-February 2017
A long period of deflation has ended
Figure 18: Annual percentage change in the price of food and non-alcoholic beverages and alcoholic beverages and tobacco, January 2015-March 2017
Real incomes set to be squeezed
Figure 19: Average weekly earnings growth vs CPIH inflation, January 2014-March 2017
Structural changes in the market – the move back into inner cities…
Figure 20: UK households, by tenure, 2011-15
…but renting remains historically high amongst younger consumers
Figure 21: UK household tenure of those aged 16-34, 2011-15
THE CONSUMER – WHAT YOU NEED TO KNOW
Top-ups still driving c-store use
Younger consumers the driver of the c-store market
Tesco out in front
A third buy their lunch and a fifth their breakfast from c-stores
Over three quarters use non-retail services
Users would most like to see improvements in price, availability and range of fresh
Will inflation hurt the sector?
HOW THEY SHOP
Convenience stores remain primarily a secondary destination
Figure 22: Where consumers shop, by how they shop, February 2017
Frequency of grocery shopping
Figure 23: Frequency of grocery shopping, September 2016
Figure 24: Frequency of convenience store use, February 2016 and February 2017
Top-up shops on the rise across the grocery market
Figure 25: How top-up trends have developed, February 2014 -17
Figure 26: How main shop trends have developed, February 2014-17
Where grocery shoppers top up
Figure 27: Where main shoppers top up, February 2017
DEMOGRAPHICS OF CONVENIENCE STORE USE
Younger consumers more likely to use convenience stores…
Figure 28: Convenience store shoppers, by type of shopping completed and age, February 2017
…and are also more likely to visit most frequently…
Figure 29: Frequency of convenience store use, by age, February 2017
…but are younger consumers moving away from c-stores?
Figure 30: Trend data: Convenience store shoppers, by type of shopping completed and age, 2015-17
Figure 31: Trend data: Convenience store shoppers, by type of shopping completed and age, February 2015-17
Big in the city
Figure 32: Convenience store shoppers, by type of shopping completed and type of area lived in, February 2017
Figure 33: Convenience store shoppers, by type of shopping completed and location lived in, February 2017
Pricing clearly a barrier to entry
Figure 34: Convenience store shoppers, by socio-economic group, February 2017
RETAILERS USED
Tesco attracts the most shoppers
Figure 35: Convenience retailers used regularly, February 2017
Trend data: Co-op continues to gain shoppers
Figure 36: Convenience retailers used regularly, February 2014-17
Customer profiles
Figure 37: C-stores most often used, February 2017
Figure 38: C-stores used regularly, February 2017
Number of shops used
Figure 39: C-stores – Number of different shops used, February 2017
Figure 40: Profile of c-store shoppers, by number of stores used, February 2017
Number of items bought
Figure 41: Number of items purchased, by retailer most used, February 2017
Number of services used
Figure 42: Number of services bought, by retailer most used, February 2017
SHOPPING MISSIONS
Something for now, something for tonight
Figure 43: Shopping missions regularly completed in convenience stores, February 2017
Younger consumers far more likely to go for food-to-go
Figure 44: Shopping missions regularly completed in convenience stores, by age, February 2017
Figure 45: Shopping missions regularly completed in convenience stores, by age, February 2017
Mission repertoire
Figure 46: Shopping missions repertoire, February 2017
Services used
Figure 47: Non-retail services regularly used in convenience stores, February 2016 and February 2017
Figure 48: Non-retail services regularly used in convenience stores, by age, February 2017
Repertoire of services used
Figure 49: Repertoire of convenience services used, February 2017
WHAT THEY WOULD CHANGE ABOUT SHOPPING IN CONVENIENCE STORES
Price the biggest concern
Figure 50: What c-store shoppers would change about where they shop, any rank, February 2017
Figure 51: What c-store shoppers would change about where they shop, by rank of importance, February 2017
Those younger are more concerned with food-to-go options
Figure 52: What c-store shoppers would change about where they shop, any rank by age, February 2017
Figure 53: What c-store shoppers would change about where they shop, any rank by age, February 2017
Improvements by retailer
What would customers like to see improved?
Figure 54: What c-store shoppers would change about where they shop, any rank by retailer used most often, February 2017
Figure 55: What c-store shoppers would change about where they shop, any rank by retailer used most often, February 2017
Thoughts of the focus group
ATTITUDES TOWARDS SHOPPING IN CONVENIENCE STORES
Threats and the future of convenience grocery retailing
Figure 56: Attitudes towards pricing and fuel prices and convenience stores, February 2017
Is online about to turn from friend to foe?
Figure 57: Attitudes towards online and convenience stores, February 2017
Figure 58: Agreement with statements regarding online and convenience stores, by where consumers do grocery shopping, February 2017
Attitudes towards foodservice
Figure 59: Attitudes towards food-to-go in convenience stores, February 2017
Figure 60: Agreement with statements around food-to-go in convenience stores, by age, February 2017
Almost half agree too many payment options is confusing…
Figure 61: Attitudes towards payment options within convenience stores, February 2017
…so are they ready for a store without any?
Figure 62: Attitudes towards an Amazon Go-type convenience format, February 2017
LEADING RETAILERS – WHAT YOU NEED TO KNOW
Co-op leads the market
Booker the largest of the symbol operators
Symbols give over more space to non-foods…
…which means a higher proportion of revenue comes from non-food
Amazon aims to revolutionise the convenience format
COMPETITIVE STRATEGIES
High-footfall stores
Figure 63: Leading c-store operators, outlets and space, 2016/17
The Co-op – Where does it stand in the market?
Symbol groups
Other businesses
Petrol forecourts
Figure 64: Total number of, and breakdown in ownership of UK forecourts, 2006-2016
LEADING RETAILERS – KEY METRICS 
Sales
Figure 65: Leading c-stores, sales, 2012/13-2016/17
Outlets
Figure 66: Leading c-stores, outlets, 2012/13-2016/17
Sales per outlet
Figure 67: Leading c-stores, sales per outlet, 2012/13-2016/17
Market shares
Figure 68: Leading convenience stores, share of all c-store sales, 2012/13-2016/17
SPACE ALLOCATION SUMMARY
Space allocation overview
Figure 69: Convenience stores: space allocation estimates, March 2017
Fresh food more prevalent in multiple-owned convenience stores
Figure 70: Convenience stores: Fresh food and other food mix, by percentage share of total in-store space allocated to food, March 2017
Food-to-go
Figure 71: Spar, Camden Town, Food-to-go counter, March 2017
Detailed space allocation estimates
Figure 72: Convenience stores: Detailed space allocation estimates, March 2017
Figure 73: Convenience stores: Detailed space allocation estimates, March 2017
RETAIL PRODUCT MIX 
Figure 74: Leading convenience stores, estimated sales by broad product category, 2016
Figure 75: Leading convenience stores, estimated proportion of sales by broad product category, 2016
BRAND RESEARCH
Brand map
Figure 76: Attitudes towards and usage of selected brands, October 2016 and February 2017
Key brand metrics
Figure 77: Key metrics for selected brands, October 2016 and February 2017
Brand attitudes: the Co-op’s ethical credentials are recognised
Figure 78: Attitudes, by brand, October 2016 and February 2017
Brand personality: Sainsbury’s and Tesco picked out as fun and engaging
Figure 79: Brand personality – Macro image, October 2016 and February 2017
M&S thought of as expensive but hits the right aspirational tones
Figure 80: Brand personality – Micro image, October 2016 and February 2017
Brand analysis
Sainsbury’s scores well on trust and recommendation but usage lags behind rivals
Figure 81: User profile of Sainsbury’s Local, February 2017
Tesco Express shows market leading awareness, usage and trust
Figure 82: User profile of Tesco Express, February 2017
M&S Simply Food singled out as expensive but a third this cost is justified
Figure 83: User profile of M&S Simply Food, October 2016
Spar lags behinds its rivals although there are positives
Figure 84: User profile of Spar, February 2017
The Co-operative showing that it takes time to change brand perceptions
Figure 85: User profile of The Co-operative, October 2016
INNOVATION AND LAUNCH ACTIVITY 
Checkout-free stores
New supermarket convenience store formats
Figure 86: Carrefour Express “Urban Life” store Milan, pizza counter
Ancillary goods and services give more reasons to visit
Apps
Ultra-luxury convenience store
7-Eleven makeover
ADVERTISING AND MARKETING ACTIVITY
Supermarket and c-store advertising spend down 6.9% year on year in 2016
Figure 87: Recorded above-the-line, online display and direct mail total advertising expenditure by UK supermarket and convenience store operators, 2012-16
Leading convenience store advertisers
Figure 88: Leading UK supermarket and convenience store operators: Recorded above-the-line, online display and direct mail total advertising expenditure, 2012-16
Majority of advertising spend channelled through TV and press
Figure 89: Recorded above-the-line, online display and direct mail total advertising expenditure by UK supermarket and convenience store operators, by media type, 2016
Nielsen Ad Intel coverage
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Data sources:
Financial definitions:
Abbreviations
Trade definitions
VAT
Consumer research methodology
APPENDIX – MARKET SIZE AND FORECAST
Forecast methodology

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