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Supermarkets stifle convenience growth

210035_199313870106448_6592537_oConvenience stores in Australia are expected to continue to face tough retail conditions over the next 12 months, with industry revenue forecast to fall by 1.7 per cent over the year to $4.4 billion, according to IbisWorld.

According to research released by IbisWorld, industry sales are expected to fall by an annualised 3.4 per cent over the five years through 2014-15 as falling consumer sentiment, fluctuating household income growth, and continued competition from small format grocery stores, supermarkets, and fuel retailers continue to pose challenges for industry operators.

The convenience stores industry in Australia has operated in a rapidly changing environment over the past five years, and industry players have  failed to match the rapid growth of convenience stores that also retail fuel (which are not included in the industry), especially those backed by retail giants Coles and Woolworths.

IbisWorld says convenience store operators continue to face stiff competition from major grocery chains. Woolworths and Coles have also been able to use their size and economies of scale to source products at a discount, enabling them to pass on cost savings in the form of lower prices.  This has shifted consumer demand away from convenience stores over the past five years.

Lauren Magner, industry analyst at IbisWorld, says despite tough retail landscape, operators have remained upbeat by reviewing prices and product ranges to offer consumers value for money.

Convenience store sales are forecast to grow over the next five years. Retail demand will benefit from improved conditions across the domestic economy in the short term, including a rise in discretionary incomes and reduced unemployment, however, strong competition from external retailers will affect profitability, with product margins expected to be reviewed further in a bid to match prices at supermarkets. Sales will also be influenced by the flow- n effects of plain packaging on cigarette products, which was introduced in December 2012.

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