IGD research predicts US$5 trillion growth
Asia’s leading convenience retailers are predicted to grow 6.6 per cent a year to 2022 by US$5.1 trillion, according to research just released by IGD.
Based on a survey of 10 top Asian convenience retailers, the research anticipates convenience will be the fastest-growing bricks-and-mortar channel in Asia over the next five years, resulting from retailers expanding their networks as well as consumers changing their shopping habits.
“The Asia convenience channel is definitely one to watch with the strong growth expected for c-store retailers,” says IGD Asia senior retail analyst Charles Chan.
“Indonesia in particular will continue to stand out as the fastest-growing country for retail, while the increasing number of single and two-person households is driving growth for South Korean retailers, especially smaller formats. This reflects changing consumer behaviour of buying smaller portions and pack sizes along with ready-to-eat meals.”
Asia’s large, congested cities with their younger and increasingly affluent populations are ideal incubators for proximity retailing, but formats and retailers are emerging in many forms, as identified by IGD’s four main proximity store formats in the region: CVS, forecourts, neighbourhood retailers and 1k supermarkets.
Pioneered in North America, forecourt formats focus on transient trade (snacks, foodservice and food-to-go); led by retailers in Asia, CVS formats serve an urban demand for impulse, speed and time of day; influenced by supermarkets in Western Europe, neighbourhood convenience has a focus on fresh food, meals and top-up; while 1k supermarkets are 1000sqm stores in different forms and locations with a focus on top-up ranges.
“CVS and neighbourhood convenience are the most widely adopted models currently, with both specialists and multichannel retailers using formats under these types. The 1k supermarkets are a growing trend, particularly in urban locations where hypermarket growth is challenging or space for new stores is limited. These stores serve limited catchment areas but have high footfall.
“Although the model we’ve outlined provides a nice way to segment customers, inevitably elements of each type do appear in other models, resulting in a blurring of store types,” says Chan.
He says that with the convenience channel expected to take centre stage in the coming years, there are five priorities suppliers should focus on to succeed in this area:
1. The store model
Suppliers should flex their thinking to the store model – proximity formats come in many forms, so suppliers should challenge their thinking around products, pack formats, promotions and the target customers.
2. The location
Flex your products and services to the location: many retailers either flex the offer and/or the store format to enable them to target as many locations as possible, so suppliers should consider where the gaps lie in their portfolio.
3. Innovation and differentiation
Although price is important, innovation around products and promotions are a key differentiation for CVS, and need to target young shoppers, a key demographic.
4. Online and digital
Online and digital technology should be a focus – all major retailers have an online presence, delivery and collection services, and are experimenting with digital and mobile. Maximise this opportunity to test and learn.
5. Build strategic accounts with the big three
Seven & I, FamilyMart UNY and Lawson are the largest operators with pan-Asian operations, so suppliers should focus on these accounts as part of their strategies.
* IGD is an international training and research charity for the food and grocery industry with experts based in the UK, Singapore and North America.
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