Urbanization Fuels Global C-store Growth
While growth in the U.S. convenience store category continues to climb, international c-store expansion also is surging in some areas, in large part due to changes in consumers’ lifestyles and increased urbanization around the globe.
Fifty-four percent of the world’s population lives in urban areas today, a proportion expected to increase to 66 percent by 2050, according to a United Nations “World Urbanization Prospects” report. Moreover, UN projections show that urbanization combined with the overall growth of the world’s population might add another 2.5 billion people to urban populations by 2050, with close to 90 percent of the increase concentrated in Asia and Africa.
“The major consumer trend is urbanization,” affirmed Michelle Grant, head of retail for Euromonitor International, a London-based market research company. “In 2009, 50.8 percent of the world’s population lived in urban areas, but that percentage is expected to be 55.3 percent in 2019. Many of these urban consumers will be time-pressed office workers that embrace the convenience store format.”
Euromonitor predicts that Russia, Japan, the United Kingdom, Indonesia and Thailand will experience the most growth in c-store sales over the next five years as a result of time-pressed urban consumers seeking grab-and-go items, including meals. Companies in these markets are quickly expanding and moving into smaller cities and rural areas as consumers there embrace the advantages of proximity, Grant also observed.
UK consumers, for example, are less likely to make major weekly grocery shopping trips, opting instead to make smaller trips to the store and stock up on their grocery needs at local, small independent grocers and convenience stores, according to Euromonitor’s Grocery Retailers in the United Kingdom report, released in March 2014. “This allows them to cut down on fuel usage and food waste,” Grant said.
Grant also stressed that c-store retailers aspiring to be global players must have a strategy for the Asia Pacific region, which accounted for 43.8 percent of global c-store sales in 2013; the second largest region was North America with 29.7 percent of global sales, Euromonitor reported.
“Asia Pacific will account for 39 percent of global sales growth through 2019 so it is an important area to be in,” Grant said. “However, the smaller regions of Middle East and Africa, Latin America and Eastern Europe are expected to experience very strong growth over the next five years in percentage terms. Markets like Mexico, Saudi Arabia and Poland are ripe for c-stores.”
Convenience, Freshness Cross Borders
In addition to increased urbanization, products and services that appeal to the on-the-go consumer are driving c-store growth worldwide. Fresh foods, in particular, are a high growth category.
Los Angeles-based William O’Neil + Company’s 2014 O’Neil Equity Research Report noted that a number of Japan’s c-store retailers, including Lawson Inc. and Seven & i Holdings Co., have even invested in cropland to help generate a stable supply of fresh produce for their stores. By some estimates, shoppers who purchase perishable items make twice as many trips to c-stores and spend approximately 20 percent more per trip, the report noted.
The convenience factor associated with c-stores in Japan also appeals to some older consumers who do not want to travel long distances to supermarkets, Grant said. She pointed to 7-Eleven’s takeaway and pre-order service that allows seniors and other consumers to avoid lines and pre-order freshly made, health conscious meals including Bento boxes as a service that has been well received there. Consumers can place their orders via website (www.7meal.jp), by phone or at a 7-11 store one day ahead of time.
Seven-Eleven Japan Co. Ltd also has benefited from grinding and brewing drip coffee to order with a service called Seven Café, Euromonitor noted. The automatic coffee dispensers have been available at all 7-Eleven outlets since January 2013.
“Sales of this coffee exceeded 300 million cups by mid-December 2013,” Grant said. “These fresh food options tend to have higher margins. Private label lines are another product type that is helping bolster margins.”
Beyond Typical C-store Offerings
Taking convenience to another level, some c-store operators are offering additional services such as ATM machines and partnerships between e-commerce companies for the delivery and pick-up packages at c-stores to attract consumers.
Lawson recently announced that its customers in Japan will be able to order items from Amazon Japan in-store for later pick-up at the same location, for example. The service will expand nationwide throughout 2015.
“This is a big step, to provide a more convenient shopping experience for customers. Convenience stores are becoming a kind of infrastructure that supports people’s daily lives, and they are important bases for Amazon’s customers, too,” Jasper Cheung, head of Amazon in Japan, said at a news conference announcing the partnership.