BARRINGTON, Ill. -- Convenience store retailers can expect continued growth in food sales over the next five years, but the industry as a whole will likely see its share of the food-retailing market decline. That's according to a report to be released next month by Willard Bishop Consulting, Barrington, Ill.
We are expecting c-stores to continue their modest growth, but they're expected, under the circumstances that we're considering, to experience a share decline, company president Bill Bishop said during a webinar titled The Future of Food Retailing [image-nocss] and hosted by The Food Institute. Bishop, who offered a sneak preview of the report to conference attendees, did offer a caveat to that conclusion in the form of Tesco, which also is offering more insight into its plans to come to the United States.
All of this could change in a year or two depending on how the Tesco entrance on the West Coast unfolds, he said, whether we continue to call those stores convenience stores' and what reactions are in turn triggered by that.
Bishop said the announcement by the British retailing giant early this year that it will enter the U.S. market for the first time in 2007 with a chain of c-stores on the West Coast is among the most talked-about matters in the food-retailing industry
There's a lot of news about Tesco being poised to enter the United States, he said, and I'm sure a number of people are going to watch that carefully sinceTesco is arguably one of the finest retailers in the world today at large scale. To read more about Tesco's plans in the United States, watch for the July issue of CSP magazine.
Bishop's report shows c-stores' share of the grocery and consumables market, now at 16.2%, will decrease to 15.4% by 2010. Similarly, traditional grocery's share will drop from 50.4% to 44.1%. That share will be scooped up by non-traditional grocery retailer wholesale clubs, supercenters, dollar stores and drug stores, among otherswhich will see an increase in share from 33.4% in 2005 to 40.5% in five years.
In other Tesco news, the company's finance and strategy director, Andrew Higginson, said the company disguised its mockup store in California by camouflaging it as a Hollywood film set. "We had the mockup in a warehouse in California," Higginson told Reuters. "It did cause a bit of surprise when people saw it, but we told them it was a film set, and they all just believed that."
As reported in CSP Daily News, Tesco announced in February that it planned to enter the U.S. market through a West Coast c-store format, using a model it has refined in its home market. By entering the U.S. using that format, Tesco hopes to avoid the pitfalls that have blighted other European grocery chains' efforts to conquer America.
It will also avoid the commercial suicide of going head-to-head with Wal-Mart Stores Inc., the world's largest retailer, which prefers to trade through large edge-of-town or out-of-town outlets.
"Big box retail in the U.S. is very well served," said Higginson. "You have not just got Wal-Mart, you have got Target Corp., Costco and a whole range of big-box retailers who do a very good job for customers. The one thing about retailing in the states is, it is convenient; it is everywhere. We have got to do a bit more than just be convenient."
Tesco plans to invest up to $460.8 million a year in the as-yet unnamed chain. With a market share above 30% in Britain, Tesco is looking for new growth areas and already trades in 12 countries. But investors have burned their fingers on previous forays by European retailers into the U.S. market, according to the Reuters report.
"We have known the States for a long time; we used to go over there right from the early 1980s learning about how the U.S. did retail, and we think we know the market fairly well," said Higginson. "We won't know a thing until we have traded the first store, which won't be until the mid to the end of next year.
The company is currently seeking sites for stores, looking to hire staff and negotiating deals with suppliers. A small team of mostly UK staff is moving into a new West Coast office this week. "All of that is quietly kicking off, and we are trying to convince [suppliers] that they ought to back this, even though we haven't got any shops.... We really ought to get a good deal from them; it is not the easiest thing in the world."
Given the company's experience in operating outside the UK as it seeks to replicate its business model around the world, Higginson said Tesco was confident its push into the fiercely competitive U.S. market would ultimately succeed. "We have done this in a few countries now, he said. When we went into central Europe, there wasn't a supply chain, so we have had to develop that. In the U.S., there is a very well established supply chain. We have just got to plug into it."
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