How valuable is the convenience format to South Africa’s major food retailers?

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There has been a great deal of hype around the Branded forecourt store ever since the first Woolworths / Engen store was launched in 2000, but in the 10 years since then the partnership has only managed to find 43 suitable sites and still do not distribute nationally.

I am not implying that there is not a space for convenience retailing in our market, it has been proven that the format works very well. I am simply warning against the over estimation of the size of the target market and the availability of suitable sites for stores.

Convenience retailing is a very specialist form of retailing and the costs associated with selling from a small store are often underestimated, especially if there is an aggressive store roll out plan. It is also difficult to find suitable sites and even more difficult to find operators who are able to make the significant investment and have the necessary retail skills to manage what is an intricate, hands-on business.

Pick n Pay and Fruit and Veg City have aggressive plans for the convenience format. They are both very good retailers and I have no doubt that they will execute the projects to their full potential. It’s the potential size of the market that remains to be seen. I don’t believe that retailers should be looking for their growth to come from the convenience format but perhaps a better question to ask is, can they afford not to participate in the sector.

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Consumers move to multichannel shopping

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There is an ever increasing number of consumers who browse through multiple retail channels to research and learn about products before making a purchase. Picking up on this development, retailers have been prompted to perk up multichannel practices including opening up online stores and enhancing internet retailing capabilities.

“Multichannel retailing refers to the concept of selling goods through multiple channels rather than solely through one channel, such as traditional brick-and-mortar stores. The additional channels that can be used to reach out to consumers include the internet, mobile devices and catalogs, each of which present unique benefits and drawbacks. To succeed in multichannel retailing, merchants must optimally utilize the benefits of a variety of channels.”

It is crucial that retailers combine multichannel efforts with existing ones to maximize the benefits. Although the number of consumers engaging in multichannel retailing is constantly on the rise, many customers still prefer the touch and feel of a new product before purchasing. A survey, conducted by commerce solution provider ATG, showed that about 40% of respondents who read catalogs never made purchases through them.

Selling through online channels can be marginally more profitable than selling through traditional stores but, online retailing also provides other advantages, “retailers can avoid the risk of stocking inventory, since merchandise can be shipped directly from the supplier to the customer.”

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