Retail sector analysed: Convenience Store

Conestoga College

Fall Semester – 2019

Section no. 8

Instructor Andrea Jansen

Group 8

TABLE OF CONTENTS

INTRODUCTION 3

PART 1: LITERATURE REVIEW 3

Opportunities and Trends In Convenience Store Market 3

Image 2: Customer Satisfaction on Availability of Healthy Food in Convenience Stores 4

Image 3: Customers Attitude towards Branded Products 4

Marketing Mix 4

Industrial Environment (PESTLE) and Convenience Store 5

PART 2: RESEARCH QUESTIONS 5

PART 3: FIVE VARIABLES OF RESEARCH DESIGN 6

Research Strategies 6

Research Design 6

Study Setting 7

Unit of Analysis 7

Sample Size 7

Data collection 7

CONCLUSION 7

REFERENCES 8

INTRODUCTION

There are various factors that influence business opportunities available in the retail sector or more specifically, in the convenience market. For example, increasing population or increasing income positively contributes toward the growth of the convenience market. It is important for any investor to explore what existing studies and reports are telling about the growth and opportunities available in the convenience sector, before making any business investment. This paper presents a literature review analysis of business opportunities available in the convenience market in the U.K. (Waterloo Region). The literature will further explore different factors that impact the growth of convenience stores and would be important for an investor for decision making. The report presents a literature review and primary research design for the research study on the convenience sector.

PART 1: LITERATURE REVIEW

Opportunities and Trends In Convenience Store Market

There are various social, economic, legal and technical factors that influence the growth of convenience retail industry. According to a report by HIM (2019), the convenience market is expected to grow at a 3.5% rate and reached 41.57 billion U.K. pounds in 2019 (HIM, 2019). However, the report says that companies operating in this market are required to keep an eye on changing trends so that they adopt such changes quickly and remain competitive in the market. The report suggested four trends that will dominate convenience market in coming years. These four trends are the refusal of plastic, preference towards healthy food, preference towards branded products, and a decrease in young shoppers (Jackson and Viehoff, 2016) in their study, identified two factors that are impacting the performance of the convenience market are health-consciousness and environment sustainability. Customers in U.K. prefer to consume ready-meals as it saves their time. Further, the authors said that people are expecting convenience stores to care for them and their health along with environment (HIM, 2019; Jackson and Viehoff, 2016).

Image 1: Customers Want to Go Green

Source: (HIM, 2019)

Rivera et al. (2014) say that the U.K. is one of the major markets for the ready-meal and convenience stores play a major role in serving this food to the customers. The authors say that ready-to-eat meals are not environment-friendly due to lengthy manufacturing, refrigeration and packaging. However, as awareness about the adverse effects of ready-to-eat food on the environment is increasing, customers are exploring ways to minimize this impact. HIM (2019) report also suggested that many customers have already started avoiding the use of plastic packaging material. They prefer to buy from the companies that offer products in sustainable/greenway (Rivera et al., 2014; HIM, 2019).

Image 2: Customer Satisfaction on Availability of Healthy Food in Convenience Stores

Source: (HIM, 2019)

Image 3: Customers Attitude towards Branded Products

Source: (HIM, 2019)

Marketing Mix

Hood et al. (2016) in their study analysed the role of the selection of the location in the success of the convenience store. According to the authors, location plays an important role in the performance and success of the store. The investor should ensure that the selected location is easily accessible by its target market and clearly visible. The study also says that if the selected location is located in a crowded market place, then the chances of success are higher. It is because customers that are coming to buy other products may also purchase from the convenience store. Han et al. (2014) in their article describing the importance of category management in the success of convenience stores. The authors said that selection of right categories helps in attracting and retaining the right customers and generating business profit. The article says that for convenience stores, it is difficult to select the right categories because of the mix of impulsive and traditional consumers. In such a situation, it is difficult for the store to collect attributes of consumers. Therefore, the authors recommended following a specific market region strategy instead of following a customized solution strategy (Han et al., 2014).

Azeem and Sharma (2015) said that the size of the convenience store varies from small to large 5000 square feet depending upon the opportunity, demand and availability of investment. The primary objective of these stores is the convenience of customers. Hence they do not compete based on price or width of products. The authors also said that high-quality in-store services play a negligible role in the performance of convenience stores. However, accessibility and high quality play an important role in the success of convenience stores. Convenience stores should be located in residential areas where it is easy for people to access the store (Azeem and Sharma, 2014; Han et al., 2014).Out of all four Ps, the most important P for a convenience store is Place. The other three Ps, i.e. price, product and promotion, play a small role in the success and performance of the convenience store (Nishida, 2014).

Industrial Environment (PESTLE) and Convenience Store

Nandonde (2019), in his article, discusses the impact of various environmental factors such as political, social, technical, and economic on the opportunities and performance of the retail Industry. The author says that not all stores perform well in the market. The business performs well when policies of local government are business-friendly.Brandsma (2018) says that technology plays an important role in the success of the business. Companies that are integrating technology in their processes are performing better than companies that are not embracing technology. However, the role of technology is limited in the convenience store. Brandsma says that convenience stores can work as a pick-up/drop-off location for online retailers for distributing products in their locality (Brandsma, 2018; Nandonde, 2019).

Akram et al. (2016), in their article, say that social factors such as age and gender significantly impact the way consumers shop. Young consumers are impulsive buyers, whereas older people buy in a planned manner. Impulse buying contributes a significant percentage in convenience store sales, and impulse sale is largely driven by the age of customers. HIM report says that the number of shoppers below 34 years is declining. In the past year, the number of young shoppers has declined by 2%. This trend shows that the social environment in the adversely impacting performance of convenience stores (Akram et al., 2016; HIM, 2019).

PART 2: RESEARCH QUESTIONS

The primary research objective of the study is to explore opportunities available in the convenience retail industry in Kitchener Waterloo Region of Canada. So, the potential investor can make a strategic decision about to invest in setting a convenience store or not.

Literature review on the subject has helped in understanding various aspects that are essential for the success of the convenience store. The primary research question will give an overall idea of the opportunities available in the convenience market. However, it will not answer various other questions that are important from the investors’ point. The other secondary objectives of the research are:

• To explore the present performance of the convenience retail industry in the region so that investors can understand how other players are doing in the convenience market.
• To explore the role of different factors in the performance of the convenience store. For example, the literature review informed that price, product and promotion do not impact the performance of the convenience store in a meaningful manner. However, location plays a significant role in its success; hence, a poor location means poor performance.
• To explore various social factors that play a key role in setting up a convenience store and ensure its success. For example, setting up a convince store near to senior citizen residence will perform differently as compare to store located in youth dominated residence.
• It is also important to understand the impact of competition on the performance of the convenience store. Convenience stores are facing tremendous competition from large retailers as well as from online retailers. Many large retailers like Tesco are buying small convenience stores (Robertson, 2018). A clear picture of the impact of competition on convenience is required for investors to make a decision.

PART 3: FIVE VARIABLES OF RESEARCH DESIGN

Image 4: The research Design.

(Source: eConestoga)

Research Strategies

The research study will use both primary and secondary research study methods to collect the data. The primary data will be collected from the selected convenience stores located in Kitchener- Waterloo Region. However, the secondary data will be gathered from online sources such as past research studies conducted on the convenience market, scholarly articles, magazines, newspapers and other reliable online sources.

Research Design

The study will collect both qualitative and quantitative data from primary and secondary sources. The research study will use mixed data to derive more authentic and credible information. Quantitative data will be supported with qualitative findings that will make the research study more credible.

Researcher interference with the research: It depicts the level of involvement of a researcher with the process of information/data collection. These levels are on a scale of minimum, moderate and substantial. We will go forward with moderate interference since we are conducting interviews, creating questionnaires and surveys and we need to connect with people to obtain information. This will help us to understand customer behaviour and buying patterns.

Study Setting

The research study will be conducted in non-contrived settings. All the interviews will be conducted at respondents’ convenience stores.

Unit of Analysis

Researchers will visit local convenience stores and collect the data from their owners. The participation of respondents in the research will be voluntary, and no respondent will be forced to give information. However, researchers will contact convenience stores to make an appointment before physically visiting the stores.

Sample Size

Under the research, a total of 30 convenience stores will be visited to collect the data. The data will be collected from 30 respondents. In case the respondent does not wish to participate in the research, the next respondent will be counted towards sample size.

Data collection

The data will be collected using a survey questionnaire. The survey questionnaire will have both structured (closed-ended) and non-structured (open-ended) questions. The close-ended questions will utilize basic and attitudinal scales such as ordinal, ratio or rating scales wherever required.

CONCLUSION

A detailed analysis of various types of literature available on the subject shows that the convenience market in Kitchener Waterloo Region is growing at a steady. A few major factors that will impact the market in coming months will be sustainable business practices, healthy food options, and branded products. Literature suggests that in the convenience market price, the width of products, promotional activities do not play any significant role. In the convenience market, strategic location is one of the most important factors that drive the store’s performance. The investor should select a location that is closely available to crowded communities and societies.

REFERENCES

Akram, U., Hui, P., Khan, M. K., Hashim, M., & Rasheed, S. . (2016). Impact of store atmosphere on impulse buying behaviour: Moderating effect of demographic variables. International Journal of u-and e-Service. Science and Technology, 9(7), 43-60.

Brandsma, A. (2018). Digital marketing influence in the Dutch retail industry: Developing a business plan for a digital marketing agency specialised in retail. U.K.: University of Applied Science. Available at: https://www.theseus.fi/handle/10024/159817

Han, S., Ye, Y., Fu, X. and Chen, Z. (2014). Category role aided market segmentation approach to convenience store chain category management. Decision Support Systems, 57, 296-308.

HIM. (July 2019). Convenience Market Report 2019. U.K.: HIM. Retrieved from https://www.himshopper.com/latest-thoughts/article/convenience-market-trends-and-opportunitie/

Hood, N., Clarke, G., & Clarke, M. (2016). Segmenting the growing U.K. convenience store market for retail location planning. The International Review of Retail, Distribution and Consumer Research, 26(2), 113-136.

Jackson, P., & Viehoff, V. (2016). Reframing convenience food. Appetite, 98, 1-11.

Nandonde, F. A. (2019). A PESTLE analysis of international retailing in the East African Community. Global Business and Organizational Excellence, 38(4), 54-61.

Nishida, M. (2014). Estimating a model of strategic network choice: The convenience-store industry in Okinawa. Marketing Science, 34(1), 20-38.

Rivera, X. C. S., Orias, N. E., & Azapagic, A. . (2014). Life cycle environmental impacts of convenience food: Comparison of ready and home-made meals. Journal of cleaner production, 73, 294-309.

Robertson, J. (2018, May 27). How convenience stores are surviving the retail storm. Retrieved from BBc: https://www.bbc.com/news/business-44224189