Amazon could be boon in disguise for convenience retail: Study

Convenience stores could reinvent themselves by selling alcohol, takeaway meals and pharmaceuticals, according to a new report that looks into the Amazon challenge and other technology related disruptors.

The report, commissioned by the Australasian Association of Convenience Stores, says that the while the $8.3 billion convenience sector is facing disruption from the entry of Amazon and driverless and electric cars, it can position itself to cash in on changing consumer trends for "extreme convenience" and instant gratification.

The study was carried out by the Australian Centre for Retail Studies (ACRS) at Monash Business School.

It said convenience stores needed to become destinations for goods and services, rather than relying on impulse purchases when filling up fuel, partnering if needed with suppliers and partners to sell fresh food, take-home meals and provide home deliveries.

They should also aim to improve in-store experiences and use technology such as mobile phone apps, digital payments and beacons to make their locations even more convenient for traditional customers and to attract tech-savvy millennials.

"Previously, convenience stores used to be about desperation rather than destination," AACS chief executive Jeff Rogut told  The Australian Financial Review.

"With so many changes happening around things like driverless vehicles and electric vehicles, the bastion of selling petrol and hoping people will buy something else is a thing of the past," Rogut said.

He added that retailers needed to be agile as it was about “keeping the core and appealing to more, it's not about alienating our current customers”.

For the project, Convenience 2030, the ACRS interviewed convenience retail sector leaders and looked at trends in Australia and overseas, where 7-Eleven, for example, is making home deliveries in Japan for orders as low as 600 yen ($6.70) and selling heat-and-eat meals in the US, according to the AFR.

In Australia, Caltex has already entered into partnerships with fastfood companies such as Sumo Salad, Guzman Y Gomez and Boost Juice while also offering services such as laundry, parcel collection and meal kit deliveries.

Geelong-based Apco Group has opened 24-hour-a-day cafes and drive-through outlets in several locations in Victoria.

Oil giant BP too has plans to sell takeaway food, prepared meals and groceries in partnership with Woolworths, drawing on its alliances with Marks & Spencer in Britain and Rewe in Germany, if its $1.8 billion acquisition of Woolworths fuel business is approved by the competition regulator.

Meanwhile, several convenience chains retailers were seeking alcohol selling licences after a Senate committee recommendation in March that convenience retailers be allowed to sell beer and wine.

Citing Japanese retailer Family Mart, Rogut said convenience retailers could have co-tenancies with pharmacy retailers such as Chemist Warehouse to provide handy locations with longer trading hours.

"Both could very successfully trade off each other's customers – it becomes more of a destination and enables pharmacies to open longer and improves security," he said.

Amazon could be more of an opportunity than a threat for the convenience sector, Rogut added, particularly if it launched its business-to-business service in Australia and enabled retailers to buy goods at cheaper prices than they currently did through wholesalers such a Metcash.

"That may be an opportunity for smaller operators to buy their products more efficiently and sell more competitively.” 

The convenience sector grew 4.5 per cent in 2016, according to the AACS, outperforming the meagre 1.2 per cent growth in the $90 billion grocery sector, and Rogut expects similar rates of growth for the next few years.

"The industry is very optimistic and positive about the future," he said.