Experts predict price war in UK convenience channel

Following the consolidation of Britain’s wholesale convenience market, research company GlobalData says it believes competition in the sector will intensify throughout 2018.

Industry giant Tesco-Booker is expected to bring prices down in convenience due to the chain’s scale efficiencies and buying power. This move, GlobalData says, is set to replicate the discounter-led price war that swept through the UK market from 2012 to 2016 with anticipated margin erosion likely to push independent operators out of the market.

With the consolidation of key groups, such as the Co-operative Group’s takeover of the Nisa network, GlobalData says shoppers can expect further homogenisation of convenience stores, particularly as many move towards a mini-supermarket-type model. According to GlobalData, this shift in the market has also been driven by a change in consumer shopping habits as younger shoppers are increasingly using convenience stores for their weekly shops, with 25.3 per cent of surveyed 25-34 year olds saying they use them for their main shop.

GlobalData also notes that space expansion in the UK convenience sector will continue to slow, pressuring retailers to diversify their stores and increase sales densities this year. It adds that while retailers will look for opportunities to drive footfall, developing company-owned space into non-grocery ventures and sharing leased space with other retailers is likely to become the norm for 2018.

Margins in the UK market dropped significantly last year as the pre-crisis oligopoly that allowed four-per-cent margins to be maintained was dismantled. GlobalData says food-retail investor concerns have been compounded by post-Brexit-input inflation and retailers have responded with challenging cost savings and margin targets.

GlobalData says it believes 2018 will be a crucial year for retailers managing investor expectations while maintaining footfall and store environments and product offerings.

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