Despite the tough retail landscape, operators have remained up-beat by reviewing prices and product ranges to offer consumers value for money
Melbourne, Australia (PRWEB) March 29, 2015
The Convenience Stores industry has operated in a rapidly changing environment over the past five years. Falling consumer sentiment, fluctuating household income growth and continued competition from small-format grocery stores, supermarkets and fuel retailers have all posed challenges for industry operators. Industry sales are expected to fall by an annualised 3.4% over the five years through 2014-15. According to IBISWorld industry analyst Lauren Magner, “despite the tough retail landscape, operators have remained up-beat by reviewing prices and product ranges to offer consumers value for money.” The performance of industry operators has been mixed throughout the period. The Lucky 7 network, which has the most stores in the industry, has grown rapidly as independent convenience store owners have sought marketing support and the improved buying clout of a group buyer. Industry players have failed to match the rapid growth of convenience stores that also retail fuel (which are not included in the industry), especially those backed by retail giants Coles and Woolworths.
Convenience stores will continue to face tough retail conditions in 2014-15. Industry revenue is forecast to fall by 1.7% over the year to $4.4 billion. Concerns regarding the increasing cost of living and the end of the resources boom are weighing on consumers. Additionally, “convenience store operators continue to face stiff competition from major grocery chains,” says Magner. Large supermarkets such as Woolworths and Coles are able to use their size and economies of scale to source products at a discount, enabling them to pass on cost savings in the form of lower prices. This has shifted consumer demand away from convenience stores over the past five years. Convenience store sales are forecast to grow over the next five years. Retail demand will benefit from improved conditions across the domestic economy in the short term, including a rise in discretionary incomes and reduced unemployment. However, strong competition from external retailers will affect profitability, with product margins expected to be reviewed further in a bid to match prices at supermarkets. Sales will also be influenced by the flow-on effects of plain packaging on cigarette products, which was introduced in December 2012.
The Convenience Stores industry has a low, but increasing level of concentration. The two major players are Metcash Limited and 7-Eleven Stores Pty Ltd, and the overwhelming number of enterprises are owner-operated independent stores. Even stores under banner groups and franchise agreements are usually run as individual businesses. The industry has consolidated slightly over the past five years. While not regarded as industry players, the entry of Woolworths and Coles into convenience store retailing, via their alliance with petrol retailing companies, has intensified competition across the industry, particularly with regard to store locations, product range and price, service and promotional deals.
For more information, visit IBISWorld’s Convenience Stores industry in Australia report page.
Convenience stores sell a range of products including cigarettes, beverages, confectionery, snack foods, ready-to-eat foods, mobile phones and accessories, magazines, newspapers and general merchandise. This includes milk bars and corner stores, and excludes businesses that primarily operate as supermarkets, sell specialised foods (fruit, bread, deli goods) or generate the majority of their sales via fuel retailing.
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