When it comes to online, knowing what customers want is simple: flexible delivery times, an easy-to-use website and quality brands at reasonable prices. In February, shares in Ocado jumped as the company revealed its second-ever profit of £11.9m, a 65.3% rise from last year.
Another example of where a move online led to a rise in share price came earlier this year, this time from Morrisons. The supermarket has signed a deal with Amazon to supply fresh, frozen and non-perishable goods for customers for its Amazon Prime Now and Amazon Pantry services, completing the missing piece of the puzzle in Amazon’s grocery offering.
Analysts say that Amazon is aiming squarely for the convenience market, where the slightly higher prices mean it can get away with charging more for its service. The deal also includes a selection of own-label products, illustrating that it’s not just deep-cut offers on big brands that customers seek online.
Nick Ramsden, managing director of Dee Bee in Grimsby, says the move would make own-label more widely available and could lift its profile. “The significant impact will be more so on the big four rather than convenience stores, but all competition will have an effect,” he explains.
Own-label is a valuable point of difference for convenience stores but if this value is available online, too, it raises the question of whether this will have a knock-on effect on local stores.
Naeem Khaliq, Day-Today symbol group controller for United Wholesale Scotland, says: “Online shopping is already in growth and all the big four supermarkets have some sort of delivered solution already. Convenience stores are doing well to fight back, by increasing their product offering, such as click & collect, and making consumers come back into store.”
To outfox the multiples online, the convenience channel now needs to define what its strengths are. Just as deep-cut deals are unsustainable against supermarkets, so is working online on their terms.
Today’s has linked up with Big Deals Local, and is rolling out iBeacons to stores to push out promotions to phones within a 25m radius.
Meanwhile, 24-hour convenience stores in London have teamed up with Bevy, an app that claims to be the first and only on-demand alcohol delivery service in the EU, to deliver alcohol and snacks to shoppers in central London.
The Amazon-Morrisons deal demonstrates a push by the supermarkets to charge more for a more convenient service. Convenience stores win by offering customers exactly that – convenience.
But as online services improve, the risk is that if players like Amazon can deliver within an hour, it will beat them on convenience, too.
“Wholesalers are the middle men – we can’t start delivering direct to consumers so all we can do is make sure we are working with our retailers to offer the right range at the right price, keeping up to date with the latest trends,” says Khaliq.
“And if they are in a position to offer online deliveries, we will work to support them.”