IGD Identifies Seven Global Convenience Models

June 9, 2009

Grocery industry think-tank, the IGD says there are seven convenience store models operating globally and businesses looking to target this channel must be able to identify the differences between them.

In its new Evolution of Convenience Retailing report the IGD says new convenience retailing models have evolved as consumer trends and new strategic alliances cause traditional models to converge.

The four new models it has identified for its latest convenience store segmentation are:

• Supermarkets on the forecourt
• Impulse crossing with foodservice
• Convenience and in-store dining
• Fresh and fast, ‘everyday’, ‘for now’ and ‘for later’

These have evolved from three traditional models:

• Fresh food and meal solutions: neighbourhood-style supermarkets and food-to-go outlets, which aim to cater for the growth in convenience. Influence in this area continues to come from the leading supermarket operators in Europe, as they look to capitalise on new growth opportunities by further segmenting their portfolios.
• Foodservice: the foodservice model was pioneered by the leading forecourt operators in the US, where 79% of all convenience stores are located on the forecourt (source: NACS 2008). Stores are heavily impulse led and adopt what is known as a ‘smokes and cokes’ merchandising strategy, supported by an extensive fast food offer.
• Impulse, speed and time of day: this model has been developed around the ability to meet the need for immediacy of purchase. Small convenience outlets, mini-marts, kiosks and vending machines are among the key operators in this tier. Outlets are located in city-centre locations and high footfall pedestrian interchanges such as train stations and airports.

“Businesses looking to gather momentum in this channel must be able to identify the common differences for each of the models, including store characteristics, location and target shopper mission,” says the IGD.

One size no longer fits all for suppliers looking to capitalise on the strong growth opportunities present in the sector, it adds.

“Manufacturers need to be more flexible than ever, and look to make decisions at a retailer level rather than at a sector level. By understanding the limitations and challenges within each model, suppliers can be better positioned to work with retailers, particularly through better tailoring of the offer.

“In reality, the concept of having a ‘Store of the Future’ is one that will never stop evolving. Instead, manufacturers should be prepared to support ‘Stores of the Future’, with new format development focusing more closely on adopting a shopper mission approach.”

According to the IGD’s report, new strategic partnerships and joint ventures have accelerated recent new format development in the convenience sector.

It claims mainstream grocery store operators will continue to target the forecourt sector in the years ahead, especially in Europe.

Convenience is also moving up the agenda for those who have traditionally not looked directly to target the sector, it says. Discounters, in particular, are leading the charge in this area by moving into higher footfall, city-centre locations.

The IGD reports this will create new growth streams for some suppliers going forward as new entrants look to fill the gaps in their product offer.

Another key finding of the IGD report is the growth of private label in convenience.

According to researchers, this is being driven by the demand for more value-driven solutions with convenience store operators and suppliers working to deliver a more affordable experience, particularly in times of increased competition and greater household budgetary pressures.

“The growth in private label and fresh food assortments in particular will continue to play an active role in this area, with varying levels of implementation across different players,” says the IGD.

Technology continues to play an important role in new format development, the IGD adds.

It advises companies stay close to developments being trialled in the Far East and US. Advances in contactless payment and self-scan checkouts are gaining strong traction in Europe, it says, as operators like Carrefour and Ahold run pilot programmes to help review the future potential of a broader roll-out.