Convenience stores face bleak future unless they change, experts warn

Wednesday, 19 September 2018

The corner dairy as we know it may not exist in years to come.

Higher rents, changing consumer demands and increased competition from supermarkets is eating away at convenience store sales and experts say owners need strategies to survive.  

Convenience stores nationwide have seen sales plunge 18 per cent in the period from 2012-2017, according to a new report from Euromonitor International. That decline in sales has continued in the past year. 

The big supermarkets were gaining customers at the expense of convenience stores thanks to fierce competition between the two main players Foodstuffs and Woolworths NZ, the report said.

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Rising demand for fresh and organic health foods more readily available at a supermarket was seen as one contributing factor to this trend.

Euromonitor research consultant Hianyang Chan said the expanding network of supermarkets in high foot traffic areas was limiting sales at convenience stores.

A wider product range at lower prices and innovations like self-checkouts was giving supermarkets the edge, Chan said.

Convenience stores were expected to expand their range of services, offer 24/7 parcel pick-up lockers and offer more health-conscious choices like fresh-pressed juices and smoothies, Chan said.

Dave Hooker, the executive director of New Zealand Association of Convenience Stores, said there was far too much reliance on tobacco which was a false economy.

'The odd dairy has a very strong ice cream offer … but overall there has not been a lot of change.'

Hooker said diversification would be the key for dairy owners. 'Dairies are really concerned about it. Where do they go from here? There aren't many options out there.'

Greg Harford, managing director of public affairs at Retail NZ, said declining business was putting real pressure on dairies.

'Dairies and convenience stores are often very small family-owned businesses whose owners struggle to pay themselves the equivalent of the minimum wage.'

Corner stores had a static or declining market and were facing increased costs from rents, rates and insurances which was hard to bear when sales were not increasing, Harford said.

He said some had moved into providing fresh coffee, fresh flowers, ready to eat foods, postal services and Lotto. 

Retail strategist Chris Wilkinson, of First Retail Group, said convenience stores needed to reconnect with their communities to stay relevant.

'Reconnecting means getting back to being the heart of the community through opening up their frontages, developing stronger relationships with customers and providing enjoyable experiences in their stores.'

He said plastering shopfronts with advertising, a relatively new phenomenon, had meant losing the connection with the community.

'While many dairies do still have strong relationships with their shoppers, others have lost that empathy and care, which has meant consumers have gone elsewhere.'

Wilkinson said dairies would not be commercially sustainable in the urban centres in the coming years.

'Increasing property values and cost of occupation, changing consumer trends and an inability to adapt will all challenge urban dairies in the main centres.'

'They simply won't be commercially sustainable. Instead, we'll see chain-run convenience businesses which have a narrower range, occupy smaller spaces and lack character or community relationships,' he said.

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