Woolworths has opened a new store under its ‘Metro’ format at Melbourne Central shopping centre, taking its total number of express-style stores in the Melbourne CBD to five.
Woolworths’ small store format was first launched in 2013 in Woolloomooloo, Sydney. There are now 42 stores under the Metro banner across Queensland, NSW, and Victoria. The stores operate on an average footprint of around 600sqm, are generally located near public transport, and offer a tailored range of products including grab and go solutions and ready-made meals.
Speaking to C&I Week, Woolworths did not comment on its expansion plans for the Metro concept, but said it will continue to open stores “at a steady rate”.
“It’s important we are placing ourselves right in the path of our customers to make it a truly convenient place to shop,” a Woolworths spokesperson said.
According to IbisWorld, industry revenue for the Australian convenience store sector is forecast to grow by an annualised 0.3 per cent over the next five years, to reach $4.5 billion in 2020-21. The two major players, 7-Eleven and Metcash’s Lucky 7, are understood to account for around 20 per cent of total industry revenue.
Spencer Little, senior IbisWorld analyst, says the convenience store sector in Australia has faced increasing levels of competition over the past five years, with this trend set to continue as the majors grow their smaller, high street targeted stores.
“Large supermarkets such as Woolworths are 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 is likely to increase competition in what is already a very competitive industry,” Little said.
“The convenience stores industry is also much less concentrated than the supermarkets and grocery stores industry. Woolworths may therefore see an opportunity to carve out a substantial market share with their new convenience stores.”
Brian Walker, CEO of the Retail Doctor Group, told C&I Week Woolworths’ push into heavily urbanised areas with smaller stores is more about speed and convenience than basket size, labeling the market as “fertile ground” for supermarkets.
“[Woolworths Metro] will have an impact because Coles will be doing the same no doubt. The corner store was effectively taken out by 7-Eleven, and now 7-Eleven faces heavy competition from the supermarkets engineering these much smaller footprints in high convenience, personalised spaces.
“For a supermarket business it’s all about brand, volume, scale, and margin, effectively. This is fertile ground for the supermarkets, particularly as we get more and more rich data about who our consumers are, where they live, and their purchasing habits. [Retailers] can now tailor their ranges better than ever before, and they can increasingly segment formats according to demographics and consumer profiles in the area.”