Convenience stores may benefit from covid-19—if they adapt
CORNER SHOPS are within walking distance of many homes, open long hours and small enough not to require customers to linger too long inside. They no longer sell just basic necessities, such as milk, beer and sweets. And they offer other services, from charging e-bikes in South Korea to paying for online shopping in Mexico. On paper, this makes them perfectly suited to the pandemic. And in practice?
Going into covid-19, convenience stores were a mixed bag. Some benefited as busier lifestyles, smaller households and ageing populations led more people to shop little, often and locally. They were the only brick-and-mortar shops in South Korea whose sales grew in 2019. OXXO, a Mexican chain with some 20,000 outlets across Latin America, reported sales of $8.7bn in 2019, up by 10% on the year before. Minimarts, which mostly operate as franchises, have been opening in China, India and Thailand.
Elsewhere they have struggled. In Japan, home to the world’s three biggest chains, they have been in outright decline. The share price of Seven & i Holdings, the giant which owns 7-Eleven and accounts for a third of the industry’s $360bn in global revenues, has dropped by around 30% over the past two years, as investors cooled on its saturated domestic market. Its two Japanese rivals, FamilyMart and Lawson, have been laggards, too (see chart). In many countries supermarkets have been muscling in on their traditional high-street turf. In September Asda, a British supermarket, launched Asda on the Move, joining Tesco Express and Sainsbury’s Local.
Despite the potential pandemic boost, performance this year has been similarly patchy. The average value per convenience-store transaction in China increased by 120% at the height of the pandemic, and stayed high. In Britain the Co-operative Group declared that sales rose by 8% in the first half, year on year, to £5.8bn ($7.6bn), thanks to its Co-op and Nisa minimarts. At the same time Seven & i reported a 12% drop in operating profits in the three months to August. FamilyMart lost money in the third quarter. OXXO’s parent company, FEMSA, is also in the red this year.
Although some pandemic shopping habits favour convenience stores, others do not. Rivals are offering the same goods for less and brought to your doorstep, often in an hour or two. Deliveroo, a British food-delivery app (part-owned by Amazon), ferries booze from supermarkets. In August DoorDash, an American one that teamed up with 7-Eleven in the pandemic’s early days, launched its own virtual DashMart.
To fend off rivals, stores must evolve with shoppers’ changing ideas of convenience, says Amanda Bourlier of Euromonitor International, a research firm. One American chain, Wawa, has opened drive-through stores. Another, Casey’s, has reported a surge in digital sales. Stores in South Korea and Japan, which face labour shortages, are toying with automated payments. In America 7-Eleven now delivers online orders to homes, as well as public places like parks. But its parent has also bought Speedway, a chain of American petrol stations, for $21bn. That adds 3,900 outlets to the 9,000-odd 7-Elevens in America (and 70,000 or so globally). It is a big bet that petrol cars aren’t soon disappearing—and nor are convenience stores.■
This article appeared in the Business section of the print edition under the headline "Turning a corner"
Author: | Post link: https://www.economist.com/business/2020/10/17/convenience-stores-may-benefit-from-covid-19-if-they-adapt
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