There was some fanfare when Pick n Pay ventured into forecourt retailing in 2008, taking over outlets belonging to oil group BP. It was expected the retail giant would quickly surpass
Woolworths Holdings [JSE:WHL], which entered the market in 2000 in partnership with Engen. However,
Pick n Pay Holdings [JSE:PWK]seems to have lost momentum. It’s thus far converted a mere eight BP Express outlets into Pick n Pay Express stores and is noncommittal about the number of outlets it plans to add over the next couple of years.
By contrast, Fruit & Veg City and oil group Chevron have converted 50 traditional garage stores at Caltex stations into a compelling fresh-food format – Freshstop – in just two years. By year-end 2012, Freshstop plans to have doubled the number of its outlets.
Absa retail analyst
Chris Gilmour says Pick n Pay probably stalled on forecourt retailing to focus on its major challenges, such as building distribution centres, optimising SAP and exiting Australia. He says the downturn might have also triggered the slowdown in opening outlets because convenience often takes a back seat when consumers are under pressure.
However, Gilmour says forecourt retailing is a great opportunity for supermarket retailers in a market traditionally dominated by fast food chains. Famous Brands operates a network of 321 outlets in all the top six fuel retailers. “Convenience is the name of the game – part of a global phenomenon,” says Gilmour. “Woolworths has been very successful and Pick n Pay has the potential to be the biggest.”
Pick n Pay Express GM Vaughn Linden agrees. “There’s value in offering the customer a convenience format to supplement the customer’s shopping experience… International trends over the past 10 years have shown the small format and forecourt stores are a growth area for the business and that all leading international retailers have a multi-channel presence.”
A typical Pick n Pay Express outlet has an average trading floor space of 150sq m. Its product line is just over 1 500 items, ranging from a limited range of groceries – with the focus on fresh – and a range of fresh flowers, fruit and vegetables, meat and deli products as well as convenience and takeaway meals. Though all eight outlets are franchised and located in the Western Cape and Gauteng, the group doesn’t put a number to its rollout plan.
Says Linden: “Convenience retailing is a key focus for Pick n Pay and we intend rolling out a number of these stores over the next few years.”
Woolworths – the first supermarket chain in SA to test the convenience format at Engen stations – currently has 43 franchised outlets countrywide. The group says the model has been well received by customers due to the quality of its offerings, in addition to stores being open around the clock. It doesn’t charge a premium.
Brian Coppin, co-founder and MD of Freshstop, says turnover has grown by 40% year-on-year after the conversion, and the chain has seen a 12% increase in footfall, while the convenience store retailing sector reports constantly declining turnovers of minus 6%.
Caltex has also seen a hike to its top line numbers. Bringing Fruit & Veg City on board has resulted in an average increase of 8% in fuel volumes at converted sites, says Teresa Booth-Oliveira, products GM at Chevron South Africa.