Convenience gowth

Posted On Tuesday, 25 September 2001 03:01 Published by
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Service stations are aggressive participants in this market

Service stations are aggressive participants in this market

THE growing popularity of convenience shopping is the driving force behind much of the change in the retail sector, with the large chains making determined moves to tap into this lucrative market.

Large retailers such as Pick 'n Pay and Shoprite are using their franchise operations to obtain a bigger slice of the sector dominated by Spar, Seven Eleven and Foodies.

The market is becoming even more congested with service stations such as BP and Caltex operating convenience stores.

The convenience trend marks the return of the corner cafe. This is the direct result of franchised stores and forecourt stores at service stations being situated in residential areas and being run by families or self-starters.

Service station companies are some of the most aggressive participants in the market. BP and Caltex say they are following the international trend, moving from being primarily producers and distributors of petroleum products to being retailers of petroleum and convenience store products.

In spite of strong growth in the convenience market, retailers are trying to keep ahead of competitors by introducing innovative services. BP launched an internet service boutique and the Wild Bean coffee shop chain at its Express Shop stores this week.

The Spar group has gone into a joint venture with Steers fast food chain to have Steers outlets in selected Spar stores.

Spar CEO Peter Hugh said he saw fast food as a competitor to convenience stores but would provide an extra service to Spar customers.

Competition in the convenience market is not limited to competition between outlets. It has entered the world of e-commerce, with Woolworths setting up Inthebag and Pick 'n Pay operating the Home Shopping internet sites.

Home Shopping GM Adrian Naude said the Spar chain, which has 20% of the grocery market in SA, is one of his biggest competitors.

Despite the growth in the convenience market, it is not an easy one in which to operate. Disputes have arisen often between the franchisees and the franchiser. Some confrontations resulted from unhappiness over the supply contracts between the two parties.

Discounts from bulk buying have not always been passed down to the outlet operators and the franchiser is the outlet's only supplier.

Franchisees do not have an easy time operating their outlets, and with their stores being open for long periods, they have justifiable security concerns. But franchisees are not the only ones with problems. Inthebag reported a loss of about R65m for the year to end-June.

In spite of these setbacks, growth in the convenience market shows no signs of slowing down. Pick 'n Pay has doubled the number of stores through its various franchise operations since 1996, while BP aims to open 20 stores a year.

Publisher: Cape Business News
Source: Cape Business News

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