The independent convenience retail sector continued to hold its own in 2011, despite the strains on the consumer purse, the increasing high-street presence of small-format supermarkets and the summer’s social unrest, according to Christie + Co’s Business Outlook 2012.
According to Business Outlook 2012, which uses average price information derived from retail transactions brokered by the company, average convenience retail property prices fell by 3.6% in 2011, compared with an increase of 2.1% increase the previous year. This mirrored a general trend across the sectors in which Christie + Co operates which saw prices retreat to former levels in the face of the continuing economic uncertainty.
Steve Rodell, director and head of retail at Christie + Co, said: “While market conditions and the lack of debt finance continued to suppress transactional volumes somewhat in 2011 — and what we did see was, by and large, either estate churn by corporates or distress sales — the sector looks sure to benefit from corporate demand for going concern opportunities and new sites in 2012.”
Difficult trading conditions, allied to the supermarkets’ ability to leverage economies of scale in cut-priced promotions and offers, resulted in an increasing number of independent operators migrating to ‘symbol-group’ branding.
Rodell said: “Symbol branding in convenience stores is rapidly expanding, as from the customer’s perspective, there appears to be more comfort in walking into a branded format such as Spar, Nisa, Costcutter, Budgens or Londis stores rather than an unbranded independent.”
However, independents are increasingly using the new brand strength to introduce ‘value’ ranges and additional product lines and competitive promotions to offset the inroads being made into their markets by the small format supermarkets such as Tesco Express and Little Waitrose.
Fuel retailers struggled for margin as 2011 saw the government add effectively 3.5p – 4p per litre to the price of fuel through taxation. Geo-political issues such as the Arab spring and UK refining capabilities are likely to result in upward pressure on price in 2012.
Rodell said: “Despite welcome news from the chancellor that January’s scheduled rise in fuel duty is deferred to August, independent operators saw relentless competition in 2011 from the supermarkets which often priced fuel as a loss-leader, in order to vie for consumers’ weekly shopping budget.
“However, independent forecourts continued to seek their own partners and engaged with convenience symbol brands such as Spar and introduced other concepts like Subway, Starbucks, Greggs and Costa Coffee to counter the effects of falling fuel sales and reducing margins.”
The high profile failure off Oddbins in 2011 resulted in fragmentation of the corporate off-licence sector. With the exception of a select number of expanding off-licence chains and wine warehouses like Majestic, Rhythm & Booze and Whittall’s Wines, the sector is now entirely populated by small groups or independent operators.
Rodell said: “Many niche operators in affluent locations are doing exceptionally well and have grown on the back of the lack of competition. However, many traditional off-licences are struggling due to the supermarkets’ ability to promote and discount alcohol products, and are opting to introduce convenience lines or align themselves with symbol brands in order to leverage sales potential.
“It is to be hoped in 2012 that the government crackdown on binge drinking may help to combat the supermarkets’ aggressive discounted promotions, offering extended opportunities for the independents and encouraging investment in the sector.”
Source: Christie + Co
