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Opinion: There is still magic in the convenience format says Nigel Collett of RPA: Group

Supermarket chain Morrisons has sold its UK convenience store portfolio at a loss of £30m. Apparently the one hundred and forty shops branded "M" have proved an unprofitable foray into this difficult sector. While they might epitomise ease and convenience for consumers, for retailers convenience stores are widely acknowledged as a difficult way to make money.

However, that fact has not discouraged new independents from entering a market which is set to grow by a very healthy 17 per cent and will be worth £44bn in the next five years. 

Who are these intrepid spirits? One example of this new wave is Eat 17. Located in a former cinema in London’s trendy East Hackney, the store offers an eclectic mix of products light years away from Tesco, Sainsbury’s or even Waitrose. Just a few minutes browsing the shelves reveals an unusual breadth of offer - from a traditional takeaway ham sandwich to packets of dried crickets and mealworms.  

The concept involves being part of the SPAR franchise while at the same time developing a clearly defined identity as an alternative and artisan food retailer.

SPAR is a Dutch multinational retail chain with approximately 12,500 stores in 40 countries worldwide including in the Middle East, India, Russia and China.  It is the UK’s leading convenience store group, with turnover in excess of £3bn. Its association with SPAR affords Eat 17 all the benefits of the buying muscle of a big brand, yet also gives it the space to create its own unique brand identity.

The traditional SPAR franchise has been a straightforward convenience store - a mini supermarket with the usual gondolas and chiller cabinets. Eat 17 has reinvented this format and shows the importance of convenience stores widening their role by folding local services and offers into one venue.  

Alongside groceries, Eat 17 incorporates a separate flower shop, a restaurant, and a delicatessen. You can eat in or take away at all times of the day: shoppers can buy a basket of SPAR branded groceries and ready meals or go for an artisan coffee or buttermilk chicken burger at the in-store restaurant. In the evening they can have dinner accompanied by craft beer, or wine from the barrel.

And Eat 17 is not alone in setting out its stall in a totally different manner. SPAR members elsewhere in the country are behind the thriving Cheeky Coffee Co in Manchester, and a petrol station in Kent that stocks fresh produce from around 60 local suppliers and has an in-store butcher.

Separate specialist retailers and services may no longer be viable in the High Street but absorbed into one convenience store they can provide a compelling offer to consumers who want the ease and speed of shopping locally. Add to the mix the buying power of a franchise and the proposition becomes even stronger.

It is this type of hybrid convenience store which will provide a worthy rival to the big UK multiples. 

The business equation for the main supermarket retailers is a simple one: the bigger you are the cheaper you can sell. It follows that store design and product range for every outlet must be largely identical. It’s a model that works incredibly well for large out of town supermarkets. 

However, scaling it down for a high street presence opens up a chink of light for independents. Brands like Eat 17 show there is room for their offer because they can deliver more interesting product ranges, more flexible store concepts, and - thanks to link-ups with bigger retailers - the value for money that is normally the preserve of the big supermarkets.

These entrepreneurs have learned that it’s not only possible to survive but also to thrive in a highly competitive market. All it takes is determination, imagination and sensitivity to your local market. 

Entrepreneurial independents will always have the edge regardless of territory; it could as easily be the case in the UK as in China, Russia or India. Customers are always seeking value but above all they are also looking for something local and meaningful. If this can be delivered it will always be the ticket to success. Morrisons may have foundered on the rocks but with the opportunity to combine big scale logistics and locally-inspired strategy the convenience store sector will present a level playing field for both multiples and independents.

Nigel Collett is CEO of RPA: Group.

 

 

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