Despite independent convenience stores proving popular during the pandemic as people shopped locally, a retail expert has suggested their future looks bleak with as many as 6,000 shops facing closure.
Gerard Rego, founder of a new B2B e-commerce platform for the sector, highlighted that owners are struggling so much that they are now working double the hours of the recognised working week – and paying themselves as little as under half the minimum wage.
The number of convenience stores in Britain, mostly independent family-run businesses, is already said to have fallen by around 5% over the last five years, to just under 47,000.
Some 3,000 stores have closed their doors in the UK since 2012 and Rego predicts that more than double that could close within the next five years. The stores are being squeezed by increasing competition from subscription services, ‘local’ supermarkets, and the knock-on effects of Covid-19.
Rego spent 12 months investigating the convenience sector in the UK, travelling around the country talking to store owners. He said: “These businesses are in dire trouble and their future is beyond bleak. I would expect that unless things change dramatically, we will lose at least 6,000 in the next five years.
“We encountered cases where in order to keep going, some family members are working 12 hour days, seven days a week and paying themselves just £4 an hour. That’s the worst case we encountered but I think thousands of people in the sector are getting well under minimum wage.
“Their businesses are unsustainable with such narrow margins. The whole sector is in critical condition.
“The great irony is that the pandemic demonstrated better than ever how essential these operations are to communities, to vulnerable people, to people who don’t have the resources to travel.”
Rego suggested that the crisis has been brought about by the squeeze effect over the last decade from the trend for major supermarkets to open smaller stores – like Tesco Extra and Co-op locals – and use their national buying power to keep prices low.
“The independent stores are paying much more for the same products than the supermarkets do,” he said. “They can be paying more than double on a unit and because they are being charged so much for their stock, they have to cut their margins to the bone to keep customers coming at all.”
Andrew Goodacre, Chief Executive of the British Independent Retailers’ Association agreed that the problem must be addressed now. He said: “The independent convenience store sector was already being hit by the proliferation of smaller supermarkets like Tesco Extra, Co-op and Sainsbury’s as well as app-based home delivery services even before the pandemic – and Covid only increased their problems as more people went back to doing one big weekly supermarket shop rather than regular smaller shops locally.
“It could really help to be able to compete better on price. If they can charge closer to the supermarket price for key items like milk and bread, then people will be more likely to use them. And if they pop in for milk they will then buy a couple of other items too.”
Despite his grim prophecy, Rego claims that he has created a solution that will support the independent convenience store industry. He is launching Subscribbe – a wholesale e-commerce platform that is claimed will enable independent convenience stores to compete with the big supermarkets.
Using a wholesale subscription marketplace model, Subscribbe’s e-commerce ecosystem connects manufacturers directly to stores. This enables stores to buy direct from manufacturers, cutting out costly middlemen and wholesalers.
The platform creates a corner shop conglomerate – bringing thousands of individual stores together so they have more buying power – meaning they can buy at wholesale prices without having to purchase in wholesale volumes.
Rego hopes that when Subscribbe is launched in the fourth quarter of 2021, he will have at least 150 stores signed up across London. His ultimate goal is to have 5,000 stores signed up in the UK by 2025.