Small space, big impact

Good things come in small packages, and when it comes to the modern face of convenience retail, the cliché has it right. Almost 60% of convenience stores trading in the UK today are under 1,000sq ft, and this slice of the market is growing at a rate of 5% year on year, the 2013 Local Shop Report tells us.

Booker’s Premier Express fascia can certainly take credit for some of this growth. The year to April 2013 saw its ranks swell by 19%, from 556 to 665. And Premier is not alone in its pursuit of these micro sites.

Almost half of Spar’s estate is now made up of stores under 1,500sq ft. Best-one, whose average store size is 1,200sq ft, is close to hitting its 1,000th store milestone, while Nisa’s format and development director Raj Krishan says it won’t be long before it opens its 100th Loco store.

While a significant chunk of the increase in small store numbers can be attributed to a rise in the number of new-build convenience stores, much of it is also down to existing CTNs and off licences expanding their product ranges to now meet the criteria for classification as convenience stores (stocking at least seven of the following key product categories: chilled food, bakery, food to go, frozen food, fruit and veg, health and beauty, household, lottery, milk, news and mags, packaged groceries, snacks, soft drinks, alcohol and tobacco).

As a growing number of retailers are coming to realise, having a small square footage no longer precludes you from offering a comprehensive convenience offer – and convenience is what shoppers want.

“Shoppers no longer want to spend hours completing their big weekly shop in a huge supermarket, but would rather do smaller top-up shops throughout the week,” Krishan explains.

James Hall, group director of symbol at Bestway, which operates the Best-one fascia, agrees. “In the current climate, food wastage on multiple over-shopping and fuel costs are driving many consumers into their local stores,” he says.

“Shoppers also see supporting small stores and their high street as part of their contribution to keeping their community alive. Negative press reports about the decline of the high street has led to a shift in consumer attitude to using out-of-town superstores or multiples,” he adds.

Properly executed, the jump into convenience and the addition of in-demand categories such as chilled foods, can offer rich pickings. Provided they have the right range for their location and demographics, small stores can do seriously big business. According to Hall, some small Best-one members are turning over more than £30,000 a week, excluding utilities. And if that’s not proof enough, 7-Eleven Hong Kong and Macau chief executive Tim Chalk recently claimed that one kiosk of just 
123sq ft was turning over more than £100,000 a month.

A rich mix

The sales mix and cash profits provided with a convenience offer are significantly improved on a pure CTN offer, Spar business development controller Mark Steven says. “To prosper these days, over-indexing in tobacco, soft drinks, and confectionery is not enough.”

Fortunately, shopper demand for fresh and chilled products is in meteoric ascent. According to new HIM Shop Waves data, 32% plan to buy more fresh produce in the year ahead. It’s a statistic which illustrates that the opportunity is out there, provided that stores achieve the right product mix for their locations.

With shelf space tight, decisions on the best and most profitable use of the space available and which categories, brands and products to stock become all the more pertinent.

“The product mix is key in a small store to ensure that you get the maximum amount of return,” explains independent retailer Vic Grewal, who owns three stores in Surrey. “In my 1,300sq ft Simply Fresh store, for example, we do not have a high cigarette mix. We are turning over about £18,000 a week and tobacco accounts for only about £1,000 of that, which is good as the margins are so low. Most of my sales come from fresh, chilled and alcohol, all of which have high profit margins. If my tobacco sales accounted for more than £6,000 of my weekly turnover, I’d be worried.

“However,” Vic continues, “the truth is that no store ever gets it 100% right from the start. A certain amount of chopping and changing always occurs. You just have to be careful and pay very close attention to your epos data, delisting and expanding products and ranges appropriately.”

The ‘less is more’ concept is also key in a small store. And as Spar’s Steven says, reducing the space allocation of some categories need not negatively impact on sales. He explains: “In some of our new, smaller format stores we have significantly reduced space allocated to categories such as confectionery, crisps and snacks and at the same time grown the category sales.”

And while there’s no substitute for detailed analysis of epos data, the past 12 months have seen many of the UK’s leading wholesalers and symbol groups up their games in terms of support for small stores – particularly when it comes to category advice and best-seller lists.

Vic continues: “The symbol groups play a key role in helping small stores to get their product mix right, and they have improved of late. They are now investing significant sums of money on surveys and insights to determine what the best-sellers are, on a national and local basis.”

This advice, says Dan Cock, who owns Premier Whitstone Village Stores in Holsworthy, Devon, has also become much more balanced. “There is an increasing amount of impartial support on ranging, merchandising and category advice from the wholesalers, which is really helpful. Historically, far too much of the category advice that we were given was biased towards a particular brand. There’s much less of that around now, although there is still work to be done. Booker’s annual best-sellers list is actually very good, and Booker is quite transparent about its support of its Euro Shopper brand. Partners for Growth is also pretty helpful,” he adds.

Increases in delivery frequency and reductions in minimum orders are also helping small stores – which tend to have equally small stockrooms – to preserve availability and cash flow.

The past few months have also seen some of the UK’s leading suppliers launch smaller case sizes. Mondelez International has recently launched 77g packs of Mini Eggs in 12-unit cases, which it claims are “ideal for new and smaller retailers”.

Pringles’ new Roast Chicken variant, meanwhile, is also available in a six-pack case size “to assist cash and space conscious retailers”.

“Availability is obviously key,” adds Londis retailer Binny Amin, who owns two stores in Kent. “With small stores generally also having small stockrooms, you have to ensure that you have regular deliveries to avoid out of stocks. I now have six deliveries a week, which makes maintaining delivery easier than in a larger site.”

Best-one has also taken control of its own chilled and fresh distribution to retailers, with single units now accounting for 83% of all Bestway Direct chilled business, a fact which Hall thinks gives retailers the opportunity to grasp the chilled category without an expensive outlay. “This also allows them to sell chilled at full value, rather than discount as the sell-by date approaches,” he adds.

And contrary to what you might imagine, having a small store doesn’t preclude innovation. If anything, Binny thinks it works to his advantage.

“In my opinion, having a small store actually makes it easier to trial new products and do more inventive things such as sampling campaigns as the limited space means that they stand out more and get noticed straight away by shoppers. In a large site, sampling tables and new products run the risk of getting lost among everything else.”

Hall agrees. “New product development is vitally important and all retailers should get behind it, irrespective of store size,” he says. “The beauty of small retailers is their flexibility and reaction speed – they can get product on shelf quicker than the larger, centrally-managed multiple chains.”

Greater care does, however, need to be taken with merchandising and positioning. “Just be careful about where it goes,” Hall warns. “Space is always at a premium, but manufacturers now produce space-saving equipment to help smaller stores site new products and this is to be applauded.”

Local products can sell equally well in small sites, too, adds Southern Co-operative  chief operating officer Phil Ponsonby. “You can absolutely do local; it all comes down to your location and shopper needs. Some of our 1,300sq ft stores do more local than larger sites because that’s what their shoppers want. You can’t sell everything so you have to play to your strengths. Our 1,300sq ft store in Bishops Waltham, for example, is next to a Spar store with a large news and magazine section. As a result we’ve stripped that category back and really pushed the food agenda in that store instead.”

The value of sales data

Small stores also need to pay as much attention to de-cluttering their epos as they do to their shelves, Jai Singh of Singh’s Premier in Sheffield adds. “Every time a new pricemarked pack is introduced you get a new barcode. You have to ensure, therefore, that you regularly delete all the old ones from your system or it can really throw things off kilter and become a massive headache, leaving you with inaccurate data.

“Buying stock at the right price is also key, and much more important in a small store than in a large one,” he adds. “It’s alright de- listing loads of slow-selling products, but you have to be sure that you are buying new ones in at the right price, or it won’t count for anything. Prices at the cash and carry can fluctuate, so having your wits about you is vital.”

Jai obviously has. Despite some challenging trading conditions his 700sq ft store is currently turning over more than £17,000 a week. Now there’s nothing small about that.