Article contributed by Nick Miles, Head of Asia Pacific, IGD Retail Analysis
Leading convenience retailers in Asia generated more than US$130bn in sales in 2014, through a combination of higher sales from existing stores, as well as significant new store expansion, according to research carried out by FIA Associate Member, IGD.
This strong growth is expected to continue, with Asia’s ‘megacities’ containing a perfect mix of high population densities, rising affluence, consumers who prefer to shop daily and close to where they live, as well as in some markets legislation restricting the development of larger stores.
Big three retailers to watch
IGD’s research has identified that the ‘big three’ retailers to watch are 7-Eleven, FamilyMart and Lawson, all of which operate in multiple markets across the region.
7-Eleven opened its first store in Japan in 1974 and currently has more than 43,300 stores trading under the banner across 11 markets in the region, while FamilyMart has more than 10,000 stories, with a further 15,700 across six other markets since opening its first store in Japan in 1973. The third retailer, Lawson, has 12,800 stores in Asia, split across five markets and earlier this year, opened its first store in Manila, in The Philippines.
Top three trends
As retailers expand, strategies are becoming more sophisticated, with some clear trends emerging:
1. Private label seen as a key differentiator
Leading retailers are investing in private label in order to drive innovation, lower prices and higher quality. Activity tends to focus predominantly on standard and premium tiers, with new tactics emerging focused on expanding ranges.
7-Eleven Japan is targeting ¥3 trillion (US$25bn) of sales from private label by the end of its 2016 financial year. In order to achieve this, the retailer regularly renews products and is expanding both its Premium and Gold brands, with private label now making up 30-40% of products.
Co-branding private label with well-known brands is also a growing tactic, particularly in Japan. This activity helps to improve the quality image of private label and from a supplier’s perspective ensures their brand presence is maintained in-store. For example, SunKus’ Style One private label and confectionery manufacturer Glico have co-branded on a biscuit line.
2. Simple, convenient and relevant marketing
Marketing activity in-store is very much tailored towards the convenience shopper. Campaigns look to target specific shopping missions, help increase basket size, promote regular shopping trips, and deliver great value for money.
Lotte Market 999 in South Korea provides a simplified pricing structure with the majority of products positioned around three price points: ₩990, ₩1,990 and ₩2,990.
Time based promotions help target shopper needs. Ministop in Japan, for example, offers a discount on coffee between 06:00-09:00, whilst loyalty cards (e.g. Lawson’s Ponta Card), electronic money payment systems (e.g. 7-Eleven Japan’s Nanaco) and collectable promotions are all popular tactics that convenience retailers use to drive repeat shopping visits.
3. Linking online and offline together
As online retailing grows in popularity, convenience retailers in Asia are looking to develop multichannel operations. This includes customers being able to access various online services in stores. For example, FamilyMart’s multimedia terminal Famiport allows shoppers to buy tickets and general merchandise products, make payments, access financial services, buy lottery tickets and make charity donations.
Convenience stores are also providing click and collect solutions. By the second half of 2015, 7-Eleven Japan expects all of its group’s online products to be available for collection at any convenience store. Through this strategy it hopes to provide a more seamless experience, make a much broader range of products available through its store, increase customer numbers and win new shoppers.
This is particularly relevant in Japan’s rural areas where there is a growing elderly population, so retailers are increasingly offering delivery services with a focus on providing meal solutions.
What can food companies learn from convenience in Asia?
Asia’s convenience channel is set to experience greater focus over the coming years, providing inspiration for suppliers and retailers looking for innovation in areas such as promotional mechanics, new product development and how to win in a multichannel world.
Combined with this the big three retailers – 7-Eleven, FamilyMart and Lawson –
offer world-leading store networks, between them trading almost 72,000 stores across the region. This means that they are set to become increasingly important in terms of their global scale.
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