Convenience growth slows as retail conditions bite

7-Eleven-Queen-Street-Melbourne-2Australia’s convenience store sector has experienced its first growth slowdown in more than five years on the back of weaker consumer fundamentals, according the Australian Association of Convenience Stores (AACS).

$8.4 billion was spent in Australian convenience stores in 2017, up just one per cent on the prior year as low wage growth, cost of living pressures and record levels of household debt weighed on the broader retail sector, the AACS said in its annual state of the industry report.

The figures are somewhat of a turnaround for the category, which has experienced strong growth in recent years on the back of increasing demand for convenience in the market, drawing a response from the major supermarkets that are increasingly weighing in on the sector with smaller-format locations in metro areas.

AACS chief executive Jeff Rogut said that the slower growth rate was still a “credible result” given broader weakness in the retail sector last year.

“The convenience channel recorded a positive result in 2017 amid challenging conditions where the impacts of several expected trends were felt more sharply,” he said.

Last week 7-Eleven’s local boss Angus McKay described current retail conditions as “brutal”, unveiling new format stores to help the business keep up.

A lacklustre convenience sector result was also recorded in the US last year, with spending up just 1.7 per cent to $230 billion.

In Australia, non-food categories weighed on growth, declining .1 per cent. Communications, printed materials and travel tickets performed particularly poorly, recording an $88 million decline in value from the prior year.

Food sales were stronger, up 2.5 per cent in 2017 on the back of an 18 per cent increase in take home food sales.

The ‘on the go food’ category was up 13.3 per cent, adding $63 million to the sector over the course of the year.

Rogut said the decline in non-food sales was unsurprising given broader technological trends, while growth in food highlighted the place for the sector in the category.

“These strong results in particular reinforce the need for the industry to continue to innovate in the food area to provide consumers with a broader range of high quality, fresh and healthier options,”  Rogut said.

Tobacco generated $105 million in sales, up 3.4 per cent on the prior year, although this was slower than the 4.5 per cent growth experienced in 2016.

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