January 2020
Jeff Rogut
CEO AACS
The Australasian Association of Convenience Stores (AACS) is the champion of the convenience industry and now in 2020 we celebrate our 30th anniversary. We have a long history serving retailers and suppliers; we’ve witnessed seismic changes, game-changing innovations, shifts in consumer behaviour, new regulations and much more.
As we highlighted some years ago when we produced our ‘AACS Convenience 2020’ report important elements to success remain collaboration, innovation and differentiation. How many retailers have we seen get into trouble recently because they were neither innovative nor sufficiently differentiated from their competitors?
As we look ahead to the New Year and new decade, our path is clear: we’re focused on helping you understand where we are, where we’re going, how we’ll get there and how we may add value to your business – large or small.
Our vision is 20-20….and beyond.
Convenience in Australia: Where we are
Our industry is dynamic and as lines between retailers increasingly blur, new competitors emerge and trading conditions present new challenges, the fast-paced evolution which defines convenience will only speed up more.
By virtue of our key reason for being – to offer a convenient service – we are at the cutting edge of retail change. We need to understand our customers if we are to go on the journey with them.
We need to know who they are, who they will be in the future, and who we want to shift across. As consumers age, socio-economic backgrounds change and ethnicities diversify, we need to ask ourselves if we’re prepared for the changes. The AACS Convenience Usage & Attitudes research we undertook in 2019 is a valuable member resource in this regard.
This year, new and different competitors have emerged and more invariably will, so we need to be clear on our value proposition. We must take the time to understand why some customers shop with us, why some don’t, what we offer that no-one else can, and what new entrants are attempting to compete with us on.
For instance, the Amazon juggernaut – could this become a viable supplier for convenience stores while also being a competitor to our channel? It’s critical we know what we stand for, what we do best – and better than everyone else.
Food, as another example. We have already carved out a reputation for being a viable meal option, but we still see the opportunity for ‘better for you’ food and beverages.
Perhaps part of the solution lies in collaborations. Food is still the future for our industry, but whether the focus is on proprietary ranges developed specifically for retailers, or through collaborations with known brands, is a question for operators.
Collaborations might be achieved through franchised operations run side by side, incorporated in stores or, like we saw with the partnership between BP and David Jones, fully branded offers.
Consumers will determine the success of these strategies but we need to offer them choice. Just as we must continue to offer customers the choice to buy legal products like tobacco, sold responsibly.
Despite the long-term trend in the decline of tobacco sales, our channel continues to do well. Yet Governments continue to pocket exorbitant taxes from consumers on legal tobacco, systematically increasing excise, while largely ignoring the illicit tobacco flooding communities at street level.
Illicit tobacco sales account for around 15% of the total tobacco market according to KPMG, with these products potentially more harmful to consumers given their unknown origins and ingredients. Government and health bodies like the Cancer Council still remain very quiet on this issue, instead focusing on responsible retailers of legal tobacco. This needs to change.
As for e-cigarettes, the landscape shifted in 2019. Developments in the USA give us cause to pause and consider, and we will need to be guided by experts on this score, although Public Health England still maintains through its research that e-cigarettes are 95% safer than traditional tobacco.
The changes we’ve experienced in 2019 set the scene for more challenges and opportunities ahead.
Where we’re going
We know the reason behind most visits to the convenience store is to satisfy an immediate need. How we do this as needs and expectations shift will define our success.
Fresh food on-the-go will continue to draw customers in. Quality, freshness, availability and value are the key drivers. You could argue we’ve got lunch covered but convenience is still not capitalising on breakfast and dinner, so these present growth opportunities for savvy retailers.
Beverages – particularly hot beverages – will continue to grow as new developments in flavours and equipment emerge. How long until a robot barista is making our coffee? This is something that will develop in the future for speed and consistency, as well as from the consumer interaction perspective.
Technology will keep moving the goalposts so we have to keep up. Product delivery is an area undergoing change. For instance, drone delivery experiments are already taking place while mobile ordering is here, but are retailers really exploiting this growing opportunity? How about digital wallets and acceptance of mobile payments – are we preparing or ready for this development?
“Chinese consumers were the first to embrace the multi-functionality of mobile phones, using these devices to interact with peers as well as brands. In 2015, China was the first market to spend more on mobile than any other device. In 2018, 77% of digital purchases in China were mobile based.” Source: Euromonitor 2019
Similarly, how long before the first frictionless store opens in Australia? Judging by the acceptance, use and growth of this concept in the USA, and while it may not be suitable in every location, it has both potential and appeal in Australia. The savings in terms of labour costs and time for consumers make it a trend to watch and for retailers to experiment with, as costs of implementation reduce and technology improves.
Even small format unstaffed stores present opportunities, as was highlighted during the recent AACS Overseas Study Tour to the USA this year and to China in 2018.
It’s clear that convenience must continue to evolve, both inside and outside the store, to ensure we keep pace with what’s happening around us. And we will.
We need to be prepared for some dramatic changes in the industry, be they driven internally or externally. We read in the media about the rebranding for Caltex to Ampol. We have read about the possible entry into Australia by the convenience giant Couche Tard. We have seen the successful entry by E.G. into Australia. We have seen the alliance between BP and David Jones. And what more will happen in 2020…….?
How we’ll get there
We have a reputation for innovation and the runs on the board. Our industry’s recent efforts to innovate, particularly in food, have changed perceptions as to what the convenience offer is.
Now is not the time to rest on our laurels. Instead we must ramp up our commitment to innovating and embracing change. By listening to the cues that research gives us, mining international trends and integrating new offers, programs and experiences based on our understanding of our customers, we will grow and flourish in the new decade.
Our industry will have to embrace – and that means plan for and invest in – artificial intelligence (AI).
Ideally, convenience operators are already mobilising in this space. The applications and scope for AI and robotics in convenience, in many areas, is impossible to ignore and hopefully retailers and their suppliers are actively investigating the possibilities here, from supply chain to customer loyalty and interactions.
Partnerships will also influence our future success. For example, despite the slow growth of electric vehicles (EVs), there remain only a few operators investing in charging facilities for consumers. Now is the time to flag that we understand the potential future needs of our customers and to start accommodating those needs.
Consumers who do drive EVs will need charge points so we should partner with leading providers of this service at appropriate sites from early on. Some shopping malls and centres are already doing it.
Then there are the impacts of driverless cars to consider, with the potential growth of these vehicles possibly bypassing service stations. How do we continue to offer these consumers value?
Our industry, indeed our world, will be vastly different ten years from now. Our challenge and our opportunity is to read where possible the writing on the wall, and ensure we not only respond to what’s happening, but lead the way.
Your Association
The AACS will continue to serve as the proactive voice and agent for change for the Australian convenience industry. We will represent our Members, large or small, retailers or suppliers to our industry.
Some of our focus areas as we embark on a new decade are familiar. We will continue to rally against the rising cost of doing business by seeking a more level playing field for our retailers and small businesses generally, calling out anti-competitive tactics, and lobbying Government about the issues on which we are being let down.
Much has been written in the media bout underpayments by various companies. This issue is sure to restart discussions about awards, cost of doing business, and ensuring that companies do operate ethically.
Crime, including but not limited to petrol theft, is perhaps the most critical issue we’re facing. We will continue to work with other industry bodies and our members to implement new programs and initiatives to protect our people, while advocating for a zero-tolerance approach from law enforcement authorities, the judicial system and legislators.
We’ll also keep our foot on the pedal in seeking new opportunities and avenues for growth. We’ll keep working to elevate the Australian convenience range up to the level of the rest of the world. We are lagging in many respects and Government needs to be constantly reminded that we’re getting left behind.
Packaged alcohol is a key potential growth category and the reasons we are prevented from competing in this space are wearing increasingly thin.
Unfortunately, and unethically, we know that the reason we continue to be denied the opportunity to compete in the alcohol category is votes. The majority of politicians we speak to agree, when we meet one-on-one, that our commercial argument for convenience stores to sell alcohol, subject to the same trading hours as local competitors, makes sense. But State Governments are reluctant to change to meet convenience needs and retailer opportunities out of fear of a negative headline and repercussions at the ballot box. The ideals of increased competition and convenience are being held back, but we will continue this long battle for retailers and their customers.
The provision of pharmaceutical products through convenience stores is another area that consumers would support, but on which Government refuses to engage, with the powerful pharmacy lobby flexing its muscle. Our proposed model is robust: qualified pharmacists in-store selling medicines responsibly, potentially as part of a separate business merely sharing premises, to provide more consumers access to medicines they need for longer periods of the day.
Yet Governments are prioritising a lobby group’s interest over customer needs and convenience. It’s not right and we will continue to pursue this opportunity.
The October 2019 AACS Overseas Study Tour to the USA showed a retail environment free of many of the burdens imposed by Governments like ours.
For instance, cannabis infused products, some claiming health benefits, were sold openly and with full disclosure, empowering consumers with information to help them make informed choices. Given our conservative approach to these matters, the road to legal cannabis sales may be some way off, but this is nonetheless a trend to watch.
In the meantime, we need to make sure the legal products our customers rely on us for are still able to be legally sold, like tobacco. This is especially important when the alternative is black market criminals pocketing untaxed profits while selling products of unknown ingredients to people of any age.
We will also continue to invest in research and bring results to our Members of new insights that may positively impact their businesses.
The AACS is your Association and it’s our mandate to maintain our focus on the areas important to you. If there’s an issue or initiative that you would benefit us lending our voice to, let us know.
Further information:
Jeff Rogut
Chief Executive Officer
Australasian Association of Convenience Stores
Ph: +61 467 873 789
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