Focus on Convenience Trading

Background to voluntarily purchase most of their petrol sold. The net result is that unit Forced to lower petrol prices, Murco solutions to customers’ needs right INTRODUCTION Murco and SPAR goods from one retail distributor in costs at neighbourhood stations are was faced with three problems: on their doorsteps. While shoppers return for beneficial terms resulting higher than at trunk road locations, inevitably would do their weekly pur- reduced petrol margins In the closing decade of the 20th century, the UK retailing industry has Murco from economies of scale. They also unless relatively high non-fuel sales chasing at the large supermarket, they witnessed massive change mainly due to an increasing domination of Murco is the UK subsidiary of Murphy benefit from enhanced marketing are achieved. reduced petrol volumes might be enticed to fill mid-week gaps major supermarket chains. Fundamental developments include: Oil Corporation of the USA and sup- impact, trading under one name, by ‘topping up’ at neighbourhood Consequently, Murco had developed reduced shop sales. plies 400 service stations in England which has since become the premier stores. the continuing decline of the corner shop its stations to cater for the local market and Wales. brand in convenience and neighbour- Income had fallen and unit costs had with small convenience stores operated By developing its forecourt shops into the disappearance of the filling station selling just petrol and oil. hood retailing. increased. Murco’s UK system is based around by self-employed proprietors recruited stores capable of intercepting this mid- Organisations have seen a need to make appropriate responses to In 1957, five wholesalers applied to from the local area. They offered con- week shopping, Murco could generate both its North Sea crude oil production Solution analysis these environmental changes. and its oil refinery interest at Milford SPAR international in Amsterdam for fectionery, crisps, bread, milk and a high levels of income. It required the Haven, from which oil product the franchise to run SPAR in the UK. small range of grocery lines. stores to be rebuilt and re-launched This case study examines how organisations with strong tradi- Murco was suffering from having its terminals in Bristol, Reading and Today SPAR is the world’s largest food with a range meeting the high standards tional retail presence, such as Murco and SPAR, benefit when Until the 1990s this proved to be a suc- market positioning redefined by com- Birmingham are supplied. Product store chain, with almost 19,000 stores of fresh and chilled foods offered by united. The ability to adapt enables them to serve local commu- cess. The higher than average shop sales petitor activity. Consequently, Murco exchanges with other oil companies in 28 countries and over 2,655 SPAR the superstores. They would also have compensated for the lower than average consulted with Elf and Gulf to explore nities through such innovations as ‘convenience trading’. extend Murco’s marketing reach into stores throughout the UK serviced by to develop and maintain an acceptable petrol volume and a competitive unit the possibility of a merger. However they Consequently, they have benefited from synergy based on their northern and eastern England. six independent retail distribution pricing policy, and to provide an ambi- cost structure was thus achieved. concluded that the required economies shared experience. Murco ‘piloted’ the new concept by creating a companies. ence shoppers would associate with the The Murco service station network is of scale would not be forthcoming. convenience store in Haverfordwest, Dyfed which trusted superstores. located in neighbourhood and rural Changes in The alternative was to develop the non- almost tripled the size of the existing areas as opposed to major highways, Murco’s the market place fuel income of the existing stations to a Creating a retail sales area. serving the local market rather than traditional strength - much higher level. To do so required winning partnership long-distance motorists. neighbourhood locations Since 1991, the supermarkets increased their share of the retail fuels market at an entirely new shop format, one capa- SPAR Through developing neighbourhood the expense of the major oil companies ble of generating higher sales than Murco understood it would require The SPAR organisation is a voluntary service stations, relationships are built by operating a low-price strategy. Murco’s local convenience stores. further expertise to carry through such a plan. Its alternatives were: retail organisation founded on the with local residents who become regular When the majors (Shell, Esso etc.) Murco was aware that grocery shop- principle of mutual confidence and customers for the service station shop as fought back by matching the supermar- ping habits had been radically altered to invite one of the established co-operation between independent well as for petrol. Despite reasonable kets’ prices, Murco’s traditional posi- by two developments: supermarket groups to develop and retailers and retail distribution compa- prices, petrol volume at such outlets is tioning was lost. Instead of a three tier operate stores at the service stations the relocation of the supermarket nies. Originating in Holland, 1932, it generally lower than at large trunk road pricing scenario with the major oil from the High Street to the edge to seek an alliance partner capable was designed as a practical way to help stations or supermarket sites. Cash companies at the top, the supermarkets of town of assisting Murco in choosing the the small private grocer compete operating costs, however, are much the at the bottom and Murco in the middle, right locations, planning develop- against the ‘multiples’. The retailers same irrespective of the volume of uniform pricing became the norm. changes in the profile of the ments, equipment and control sys- average household. tems in addition to merchandising, The Traditional Price Structure Pricing Structure Mid-1990s Onwards Shoppers found the new supermarkets pricing and promoting the stores. to be very attractive due to the range and Top End The chosen partner would also have (Premium Prices) Majors quality of the meal solutions they (e.g. Shell, BP, Esso) to have a logistical system that could offered, the depth of their fresh and maintain supplies of fresh and chilled food sections, and the ambience, Middle End chilled produce, develop attractive Neighbourhood Providers although they did not necessarily wish (e.g. Murco) meal solutions, and be capable of to shop there more than once a week. training Murco’s locally recruited Low End Supermarkets Uniform This indicated a market opportunity for self-employed retail proprietors - key (e.g. Tesco, Safeway) Low Pricing Murco, if it could provide competitive players in the concept. Convenience operators and petrol com- access to the site is via a round- Site development panies alike have recognised the about which also serves as one of importance of having a strong retail the entrances to the hospital and to On the basis of the research findings it offer, and partnerships have been the retail shopping area, and all was agreed that, through offering a com- formed which link the retailing traffic using the retail park has to prehensive range of impulse snacks, the EXERCISES strength of the grocery industry with pass the forecourt both in and out. site should become the main destination the knowledge and experience of the store for many busy working people, i.e. A challenge to the success of the pro- forecourt operators. the hospital and the retail park employ- What is meant by What key environmental ject was the extent of retail competition 1 5 ees, looking for convenience meal solu- ‘convenience trading’? changes influenced Murco in the area: Creating a pilot project tions and ‘ready-to-eat’ snacks. to alter its approach to a local Londis store in Prendergast What are the main advantages neighbourhood retailing? To reinforce the new focus of the store 2 Murco first approached SPAR UK Ltd with an estimated turnover of of neighbourhood service the SPAR fascia was advertised boldly How has Murco affected in August 1998 with a view to imple- about £10,000 per week stores as opposed to 6 on the shop front and two external its marketing mix in relation menting a joint forecourt programme at supermarkets? another petrol forecourt store tower fascias. The new SPAR imagery to the new ‘convenience’ its site in Withybush, South Wales. 8 tenths of a mile to the north was installed inside the store to help concept? What factors decide the Murco and SPAR developed the operating with a 24hr store on site create both a professional and ‘fresh’ 3 range of merchandise sold looking store. The shop floor sales area How important was market following objectives:- a Kwik Save supermarket directly 7 was more than doubled, and the layout in a neighbourhood service research in Murco’s decision 1) Murco’s site at Withybush would opposite the forecourt of the store was designed so that it station? making? be developed to trial a modified a full size Safeway superstore invited the customer to walk through form - the interceptor store concept Identify the core strengths of: 1/4 mile to the south the store, creating further impulse pur- 4 Reviewing the overall 2) the development of the store would a. Murco as a retailer 8 chase opportunities. objectives, discuss the N increase retail turnover a full size Tesco superstore two b. SPAR as a retailing outfit. potential outcomes in the miles to the west. A new ceiling, lighting, counter, off 3) estimated Gross Profit would Withybush project. licence area, hot food area and a larger improve The site thus presents a challenge W E dairy cabinet were all included in the when considering its position on the 4) the site would be developed as the refit. Scanning was introduced from day main 24-hour convenience store in road, and the proximity of a main S one to enable day-to-day operational foodstore. This together with the‘traffic’ the area with a strong emphasis on reports and data to be produced and to Emphasis was placed on:- generated by customers to the retail Solution - a new snacks efficiently track the store’s performance. extended opening hours park and adjacent hospital site indicat- partnership arrangement 5) new concepts such as hot food and ed that the concept of an ‘interceptor’ As the staff are often the first point of fast and friendly service scanning would be introduced. contact a customer has within the store, it Murco selected SPAR as a suitable sensible prices store would need to be modified. was agreed a key element to the success alliance partner for its Withybush core convenience range Murco felt better placed to tap into the The Withybush site of this site was the training and develop- outlet, as it possessed the essential extensive ‘Own Brand’ late night market providing hot food ment of its management and staff. requirements of expertise and logistical product range and meal solutions. The forecourt and store are situated support as well as being a recognised clean and attractive stores. within a retail park off the main brand across Europe. As a distinct The future Convenience trading has become one A40 trunk road to Fishguard Research undertaken franchise, it was of particular value in of the fastest growing concepts in the Within 12 weeks of opening, the retail the chilled, fresh and prepared food the site is on the outskirts of UK grocery industry. It is characterised Extensive market research was carried sales had exceeded the low case esti- sectors which were to be of vital Haverfordwest to the north of the by the emergence of many new trends, out to find the profit potential of mate and the best case projection was importance at this particular store. main town area at the top of a new in particular the rise of forecourt retail- the area and the site location. Detailed revised upwards. ‘relief road’ In the early 1980s, SPAR UK Ltd calculations were made using published ing as well as the major superstores It is expected the partnership venture realised the future lay in convenience there is limited housing develop- market research data showing: operating small numbers of conve- between Murco and SPAR will prove trading - an American concept which nience stores in both stand alone and ment - the main concentration of A) the types of consumers living in to be successful, building on the exist- offers the customer “What is wanted, forecourt concepts. residents is to the east of the site the site neighbourhood ing strength and reputation of two Access the CD-ROM... when it’s wanted”. around the Cardigan Road in the The forecourt store is well placed to highly respected players in their to print this Case Study, area known locally as Prendergast B) their typical consumption patterns, Under the “Eight Till Late” banner, exploit the convenience opportunity. individual fields. The venture paves find more about Murco i.e. how much they spent on specific SPAR attempted to do something Whilst the offer itself may vary from the Withybush Hospital has 380 the way for new opportunities in retail- and for hot links to types of merchandise. www.times-money.co.uk different from the rest of the UK grocery location to location, it essentially con- beds for patient care plus an acci- ing based on a convenience concept www.mbapublishing.co.uk retailing industry. Its offer comple- sists of a combination of impulse, top-up dent and emergency department. Armed with this information, the plan- that complements existing retailing mented, rather than competed with the and emergency products allied to a con- The hospital has 1,000 staff and ners were able to forecast a ‘low case’ patterns, rather than creating direct Browse the Web... multiples, providing a distinct, differ- cise grocery range within a friendly store includes a coffee shop, pharmacy turnover and a more optimistic ‘best head-to-head competition with the for up-to-date company info entiated service to other sectors. environment with long opening hours. and a small gift shop case’ projection. existing supermarket chains. www.murco.co.uk