Hey big spender

The discounters are rarely out of the headlines thanks to their quality ranges at bargain basement prices. But rather than getting into a race to the bottom, a number of convenience retailers are differentiating themselves by trading up to a more premium proposition.

“We wanted to change the way that customers perceived us,” says Welsh retailer Conrad Davies, who recently debuted the new Spar Market concept at his Pwllheli store in Gwynedd. “We wanted to go from a value-driven offer and take it more upmarket and more premium, emphasising all the local products we have in the area. We have more than 70 local suppliers and we wanted to really show our customers that we have something different. The idea behind it was to improve margins and customer footfall and change from being value driven where we were seeing declining margins and declining sales.”

Kevin Lowe, format implementation manager at Scotmid, claims that he first witnessed demand for premium in London. “The kick-off for us in terms of where we were going with the premium fascia was all about understanding the customer using the stores,” he says. “We were watching from afar as lots of people round about the centre of London were moving into the premium end of retail. It was about us trying to take that and make sure we had the right look and feel in our marketplace.”

Scotmid launched its premium black fascia in 2013 at its Warrender Park store in Edinburgh, and the format has since been rolled out to about 10% of the group’s estate. The society’s Stockbridge outlet was named Convenience Retailer of the Year in the 2015 Convenience Retail Awards.

Lowe explains the key criteria for stores upgrading to the premium fascia. “We were benchmarking that if you were round about 75%-plus on the A-C bracket on Acorn profiling that would be a really good indication of where we would want to trade,” he says. “Coupled with that is how the store traded in its fresh food participation as well as how it sells in beers, wine and spirits with a propensity towards wine. That was our original thinking. In terms of now, and how things evolve, another piece we’d look at is how the beers market is trading in our stores and if you move towards craft and craft local, that’s been a key indicator for us.”

West Sussex retailer Ramesh Shingadia explains that the growth of premium stores has been a gradual process. “The bar is being raised over time and people are a lot more in tune with customer expectations and raising the standards of the store,” he says. “People are much more demanding in terms of fresh and chilled and wanting to have a premium environment. So retailers are more willing to invest in that execution in store that gives the customer what they are looking for.”

He has felt that his store would be suited to a premium offering for some time, but only this year has he taken the leap, changing his Londis store in Southwater into a Budgens. “Historically, when we’ve done various reports on the store it’s always highlighted that we are in an AB demographic area and we should really be premiumising the whole store,” he says. “We really looked at it seriously four years back and our last major refit was done around a Budgens concept, but we shied away from opening as a Budgens.

“Now we feel it’s the right time. With Booker taking over the brands, they’ve never been stronger. They’ve put retailers in a really good place. Their approach is simpler to deal with and a lot of the constraints that you had previously have all been removed, which means the brands are now standing strong on their own. Our other store in Caterways is still a Londis and will remain so. But this gave us the opportunity to capitalise on the brand that was right for us.”

Wilson Rea didn’t think twice about moving from Today’s to the premium Keystore More fascia last year. “I always wanted to go Keystore, but there was already a Keystore in Lanark, so Filshill said no at the time, but then they brought out the elite Keystore More club and they asked me if I wanted to be part of it. I jumped at the chance.

“Where I’m situated in Lanark is on the side of a main road on a forecourt and all the houses round about are privately owned, so it’s quite an affluent area. I knew straight away that I’d be accepted. I think my customers were waiting for something better than what I was doing and they’re overjoyed at what they’ve got now.”

Once the premium fascia has lured customers through the door, the emphasis is very much on growing basket spend. One of the key differentiators for more upmarket stores is the investment in, and positioning of, fresh produce. “When customers come into the store, how they feel and what they’re going to buy depends on how the store looks and how it’s laid out,” says Chaz Chahal, who owns four Costcutter and Simply Fresh stores in Worcestershire.

“You need to have a nice fruit and veg fixture, which is always fresh, so people feel they are getting value for money, and that has to be linked in with fresh meat and other fresh produce that makes customers want to do scratch cooking, or inspires them. Ultimately, when people are making a meal there’s a good chance they’ll top it up with a bottle of wine or a beer, which will top up your basket spend.”

Scotmid has a similar strategy at its premium stores. “You’re leading the store with a strong fresh offering, and really trying to tie in premium food linked with meal solutions,” Lowe says. “It’s about what can you do for your missions in terms of morning, lunch and meal for tonight and tying that in with having the complementary items, such as artisan bread. This is combined with a good beers, wines and spirits offer.”

Budgens Southwater also champions fresh produce. “We’ve gone in for a much deeper fresh and chilled range,” says Ramesh. “Customers are much more discerning in terms of what they buy now. They want good quality produce and they are prepared to pay the price for it.

“Even in the general convenience offering, we’ve gone in for a deeper groceries range,” he explains. “We’ve expanded grocery by six metres. You need a certain amount of value messages, but what you’re also looking to do is increase the basket spend by premiumising products.”

An extra Cook chiller has also been added. “The overall feel of the store is that it has a more solid offering for a bigger basket spend than perhaps we had before. We’re not looking at a radical change, but a gradual change to premiumisation.”

The store has also introduced a premium range of wines from Laithwaites, and expanded spirits from 2.25 metres to five metres with the introduction of numerous gins and vodkas.

Wilson has also developed his alcohol offering. “I’ve introduced more expensive wines and added to my Champagnes. I used to try to stick to £6.99 and £7.99 bottles of wine and now I’m stocking £15 bottles. Customers are looking for a better quality of wine, and they’re selling well.

“The Champagnes are more upmarket, too. Before, I just had Moët at £35, but now we have £50 bottles,” he says. “It’s the same with gin. We’ve expanded that with different flavoured gins up to £40 a bottle, as well as your run-of-the-mill Gordon’s. I never had upmarket gins before.”

The right range

Spar Market is arguably the most premium of all the c-store concepts, and an improved off-licence range is just the tip of the iceberg. “We’ve brought in a lot of new ideas and concepts, such as cereals you can help yourself to, and lots of food-to-go options,” Conrad says. “We’ve doubled the size of our fresh offering; we’ve brought in a fresh orange juice machine; we’ve enhanced our wine section with premium wines from Laithwaites; and we’ve added a meat ager - just to show people that we have a butchers working within the business.”

Conrad has gone the extra mile and sought out unique lines to add additional interest. “Some 12 months before the refit I was doing a lot of work on where I wanted the store to go. I wanted to bring in a lot of premium products and points of difference. I did a lot of research and went to see a lot of potential suppliers, one was booze-infused smoked salmon called Pished Fish. It’s something different and premium and it’s offered customers something completely outside what they’re used to. It has fantastic margins and it’s a good talking point in the store as well.”

And it seems his hard work is paying off. “We’re 12 months in now and our margins have increased by 3.5%.”

Despite having launched only six weeks ago, Ramesh is also seeing good results. Turnover has jumped 10% thanks to increased footfall and bigger basket spend.

“It’s early days, but generally we’ve seen a much greater participation in fresh and chilled, which is exactly what we are after to increase basket spend. Fresh participation is up 10%, so that’s a big plus sign,” Ramesh says.

“We’ve definitely seen an increment in the margin, but again participation in fresh has increased, so you’d expect to see an increase in margin. But don’t forget, your waste goes up as well so you need to maximise on sales and minimise on wastage. That’s the downside of going heavily into fresh and chilled, but it’s working for us.

“It’s high margin, it’s a footfall driver, it brings people into the shop and gives it a much better feel. It ticks all the boxes in sending out the right message to customers.”

Wilson’s basket spend is certainly headed in the right direction. “There has been increased footfall - I think I’m getting an extra 1,000 customers a week. Basket spend has gone up, too. It was about £6.50 before, and now it’s more than £8. It works!”

Of course, a premium fascia isn’t going to work in every environment, but if you sense that your customer base would be suited to a more upmarket offering, then it may well be worth investigating further. “In terms of retail, it’s about trying to find that point of difference that keeps your customer engaged,” says Lowe. “It’s about being adaptable and knowing your customers. The more you can keep customers feeling that your store is their store is a good thing. You need to make sure that you’re relevant.”

Going premium doesn’t come without its challenges, however, particularly when mastering an expanded fresh and chilled range. “We’ve done retailing for 35 years, but all of a sudden fresh is a new experience for us,” says Ramesh. “The risks are wastage, not getting the category right and due diligence.”

But he is convinced that it is worth the effort. “There are a lot of learnings. It’s a challenge, but a positive one.”

He urges retailers to do their homework thoroughly before making any decisions. “My advice to retailers would be to look at your business, look at your demographics, look at your customer base. Ask yourself whether your shop is right for your demographics and whether you are giving your customers the best environment and product range. If there is a gap between the two then maybe it’s a case of having a dialogue with your wholesaler to ask whether you are in the right place and what could you be doing better.

“Retailers have a lot of challenges with National Living Wage and business rates, so we need to be looking at their businesses to see whether they could be taking it up to the next level.”