There’s nothing small about the allure of stores under 1,000sq ft. C-Store looks at how retailers can sweat the space of limited square footage
With the demand for convenience and speed of service on the up, alongside rising commercial property prices, small stores under 1,000sq ft in size are a logical market response - especially in urban areas where these trends are most pronounced.
HIM Research & Consulting has revealed that three-quarters of UK shoppers want to get in and out of a store as quickly as possible, while seven in 10 global shoppers say a long queue would make them abandon a purchase within a c-store. But new payment technologies such as contactless, mobile phone-based payment solutions and Amazon Go’s checkout-free concept could consign the old-fashioned queue to history. And with less space required for congestion, less space is required in store.
Meanwhile, retail property prices are rising, up by 8.8% in 2016, according to commercial agents Christie & Co. Demand for stores under 1,000sq ft is strong, and size is of little relevance when it comes to turnover and profitability, says Christie’s managing director for retail Steve Rodell. “There remains demand at every level of the market, including smaller stores, as evidenced by the continued interest in the McColl’s disposals which are all less than 1,000sq ft. It is more about the level of turnover and profitability than size - some of the most profitable stores in London are small kiosks,” he tells C-Store.
With wage costs rising, small stores also appeal due to their need for fewer staff, says Tim Chalk, independent retail consultant and former chief executive of 7-Eleven Hong Kong. “If you take Hong Kong as a future city centre model for developed countries, where space becomes a premium smaller stores will offer the best returns as both rents rise and labour shortages develop. They are more efficient in terms of sales per square foot and easier to operate, requiring fewer staff,” he explains.
In the UK half of all independent c-stores are under 1,000sq ft, according to the ACS Local Shop Report 2016. Booker’s Premier Express fascia, which encompasses stores up to 800sq ft, makes up a high proportion of these stores. At present the number of Premier Express stores exceeds 1,150 and is “growing well”, compared with 665 stores in 2013. Elsewhere, nearly one in three (31%) Spar stores are less than 1,000sq ft. And Simply Fresh has launched a new format for stores under 700sq ft, which managing director Kash Khera says was inspired by a trip to Hong Kong. A couple of stores in new locations have already begun trading under the format.
Furthermore, one-quarter (24%) of multiples are in the same under-1,000sq ft size bracket, up from 17% in the previous year.
Sweating the space
The Simply Fresh St James News in St James’ Park tube station in Central London exemplifies the viability of providing a modern convenience offer in a space traditionally associated with a CTN. Prior to opening in 2015, the 800sq ft store was a CTN turning over about £12,000 a week, 90% of which was confectionery, tobacco and news. Current sales are up to £35,000 per week with a gross margin of 36%, much higher than before the refit. The store is strong on fresh and chilled, with fruit and veg sitting in a wooden stand outside the store, while more than 100 croissants and pastries are sold every morning.
In order to ‘sweat the space’ of a small store, the importance of getting the product mix and range right is crucial, and what works in a busy London tube station might not work elsewhere. Taking the store’s location into account is the first step, says Chalk. “Categories need to be focused on the location, whether it is in a commercial office area, entertainment bar area, transit area (bus, rail, motorway, airport or underground station), petrol filling station, or residential neighbourhood. Ranges should differ by customer need and affluence. These factors will especially influence proportion of space given over to cold drinks, alcohol, ready-to-eat and fast food, as well as any additional specific locational non-food products, such as car accessories, maps, or guidebooks.”
Spar UK retail director Ian Taylor adds: “The key to trading a small store is to major on the customer proposition and ensure you cover the important areas that your customers want, rather than try to cover all bases. If you are a small forecourt, then food for now and impulse are the key drivers, so be very good at offering these. If you are a small neighbourhood store, then focus more on tonight’s tea and off licence. It really doesn’t matter what size store you have, the customer proposition is always the key driver.”
One retailer who is especially qualified to advise on the art of small store retailing is Chaz Chahal, who won the Best Small Store category at the Convenience Retail Awards 2017. Last year Chaz transformed an outdated 300sq ft CTN into a 900sq ft modern convenience store in the village of Inkberrow, in Worcestershire. The resulting Forge Shop has “exceeded expectations”, as recognised by the CRA judges. But in Chaz’s case, the minimal store size was not completely by design, due to the planning constraints of working within a conservation area.
“With a small store like ours you’ve got to really know your customer to get it right. Don’t try to please everyone; focus on the categories that suit your demographic. I’m in a village store and have a combination of transient and local customers, so we do sandwiches, coffee, fresh and ready meals, lots of fresh produce, but don’t have a bake-off. We’ve got a really good local bakery nearby who supplies us. You can take out complications by working with local suppliers.”
Chaz says he is able to offer the range he would for a larger store, “but with fewer facings”. This also enables him to reduce his aisles from two to three, and he has end-of-aisle offers for customers on a budget.
The traditional CTN offer has not been completely lost, either. “We can still do chocolate and crisps, but in a smaller space.”
The heightened focus on space has also altered his perspective on trading in larger stores. “I’ve realised now with a larger store that it’s best to use extra space for something like a sit-in coffee area,” he explains.
Chalk says retailers need to be ruthless with slow sellers. “You simply cannot afford to have products that are not selling, so strict planograms and stock rotation are needed, with regular range and category reviews. In a total range of 3,000 products, with about 1,500-2,000 in any particular store, 7-Eleven Hong Kong used to introduce on average of 200 new products per month and consequently delete 200 non-performers.”
Innovation is also key to prevent customer boredom with a relatively limited range, he adds. “Either innovate through new products, or with marketing programmes, seasonal promotions, or flavours of the week.”
Simply Fresh has carried out several range reviews at St James News based on analysis of sales figures since the store opened. It also carries out a large amount of tasting activity. “There is a high footfall and as such the store is a good guide for new products and ranges. Partly as a result of this, there are many products/ranges from niche suppliers,” a Simply Fresh spokesman says.
Point of difference
The success of small stores also depends on developing a unique point of difference, especially in high footfall areas. “The simplest equation is that the highest sales occur where the most number of people are passing. It is then just a mathematical equation in terms of how many of those people passing typically come into the shop and the average spend,” says Chalk. “The consideration then has to be how much competition is around you to share that footfall with, and the typical directional flow of customers and who they see first. Not many will pass one c-store to get to another if they are relatively equal on hygiene, cleanliness, look and feel, and range.”
Chaz agrees on the importance of standing out. “Maintain the core range, but go the extra mile with something that will drive customers in from a wider area,” he advises.
Chaz has put his theory into practice with the recent introduction of about 20 varieties of speciality gins. “They’re niche, quality products that people are prepared to pay for, although we’ve kept the margins tight. We’ve got products such as Cotswold Gin, a Mediterranean-sourced gin and Chase Gin. We’ve trained the staff so they can pass on knowledge to customers and provide great service, which all adds to the customers’ experience. We’ve sold five to six bottles of some of the variants over a couple of weeks, and it’s drawing more people in from a wider area.”
Chaz also operates a dry-cleaning service, which provides him with commission, but he doesn’t have a lottery terminal because he doesn’t believe the extra footfall translates into extra sales. In a small store, every decision has to be a winning one.
Spar Green Bank, Bristol
Justin Turpin owns an 800sq ft Spar store in Bristol which underwent a refresh in 2015 to ‘micro manage’ the space.
“It was becoming an up-and-coming area [Easton], with lots of young families moving in, so we wanted the store to cater to them,” Justin says. Spar distributor Appleby Westward collaborated on the refresh, which aimed to make “every square inch count”.
An extra four metres of chiller space was introduced to focus more on fresh and chilled, and the organic section -which Justin had introduced “before it was trendy” - was enhanced.
Less space was given to news & mags, ambient grocery, and double facings throughout the store. Non-food was halved, with toilet rolls reduced to just cheap and premium ranges.
More attention was also given to the Spar own-brand range for extra margin. “We do well at selling Spar own brand in a small space,” he says.
Know your market and monitor sales forensically, Justin advises. “If you have an active wholesaler, use their knowledge and planograms. You need to monitor, monitor, monitor, and don’t be afraid to cut lines and try out new ones.”