As cost-of-living pressures change Australian consumers’ purchasing behaviour, Theo Foukkare, CEO of the Australian Association of Convenience Stores (AACS), looks at how convenience retailers can respond.
There is no doubt that when consumer’s household income comes under immense pressure, consumers across all income brackets must make decisions to suit their household budgets.
In 2024, all Australians are being challenged with increased costs wherever they turn, at the grocery checkout, at their c-store and the fuel bowser, rents, mortgages, insurance, electricity, childcare, education – the list keeps expanding.
Most retailers across all channels are under immense pressure to maintain their customer traffic to drive sales, and we are seeing various strategies play out in terms of retailer approaches.
Coles and Woolworths continue to report private label ranges playing a more significant role than ever before, and ALDI’s performance in capturing the grocery consumer goes from strength to strength. Promotional discounting continues to play a strong role in maintaining sales. Whether this is a direct reaction to the immense pressure that various government enquiries have had on their approach is yet to be seen over the medium term. The grocery channel is at a distinct advantage over many other retailers given their huge buying power, ability to blend their profitability across thousands of product lines, and the fact they offer consumers with significant choice for all households.
Quick Service Restaurants (QSR’s) have seen significant growth over the last few years. However, over the last 12 months we’ve seen extreme value offerings enter the market to maintain their customer base, with $2 and $3 items, under $10 menus, and recently, aggressive positions such as offering two burgers, fries and a drink for $6.95. This appears to be achieving their objectives of driving customer traffic to maintain sales whilst delivering value to their customers during these challenging times.
The convenience retail industry has also had its challenges with declining foot traffic, reductions in the items per basket as well as reductions in the average basket spend. This is primarily being driven by the challenges consumers are facing in the current climate, however the historical price perception of the channel in the consumer mindset must also be playing a role in this. The channel has long been seen as the two or three for promo deal channel, which has a role to play, but it needed something more given the state of play.
Over the last few months, we have seen a significant shift in promotional strategies with the primary objective of resetting the value perception for their customers and trying to drive both footfall and in-store sales conversion. We are seeing value offerings promoted heavily on TV, radio, and in-store such as a pie and energy drink for $5, sandwich and 600ml soft drink for $6 or $7, confectionary bars on promo at $1 and $2, $3 pie days, and hot food and drink combos.
Speaking with retailers and suppliers recently, this new value driven approach is delivering on their objectives, with record volumes being achieved across these offers, whilst halting declining foot traffic and changing the price perception of the channel.
The biggest question I have, is will retailers maintain this approach into the future when the cost-of-living crisis subsides and consumers return to their normal purchasing behaviour, or will this form part of a future strategy to reposition the channel as a real competitor to breakfast or lunch on the go and finally fight directly with the QSR industry?
This leads me to then think about what opportunities lie ahead if this approach is applied to categories or subcategories within the channel, and ultimately change the broader price perception of the channel?
Only time will tell, but I say bring it on – not only can we be the most convenient option for consumers, but we also have the opportunity to capture a larger slice of the pie.
This opinion piece was written by Theo Foukkare for the August/September issue of Convenience and Impulse Retailing magazine.
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