As Asia wakes up for the day, people are on the move. Khun O wakes up at seven and is out the door in 30 minutes. On her way to work, she stops at her local 7-Eleven for breakfast, where she uses a special promotion to get a free juice with her noodles. For lunch, she goes downstairs to the small supermarket in the office building, chatting over a rice lunchbox meal with her colleagues in the small seating area in the store. An afternoon coffee from the Family Mart around the corner gets her through the afternoon. While commuting home, she stops at Tesco Express to pay some bills and pick up a pre-cooked meal. She’s meeting friends later to go to the movies, so she picks up her tickets at the same time. Coming home later that night she stops in at 7-Eleven again for a hot chocolate and a snack.
Khun O’s heavy reliance on the convenience channel is not uncommon. The convenience offering has continued to develop across a multitude of retail channels: it is more relevant now than ever. It’s not too much to say that what was once merely a store-front is becoming part of many people’s way of life.
In 2030, Asia will be home to 3 billion middle-class consumers. Asia’s wealth is increasing exponentially, and many consumers are experiencing real discretionary spending power for the first time. There are enormous disparities between the rich and poor, but it is within this disparity that opportunity arises. As their increased purchasing power gives them first-time access to “affordable luxuries,” it is lower- and middle-class consumers that represent the greatest opportunity for CPG retailers and manufacturers.
The opportunity is in fact larger than the numbers generated by an analysis of consumers’ income levels. In countries such as Indonesia, where almost 60% of consumers earn less than US$5,000 a year, as many as one in three still believe they have the money to spend freely. Spending is not only about disposable income, but about a spending mindset, and whether life generally is improving for these consumers.
The rising demand for premium categories and products confirms this trend, as consumers seek a version of everyday necessities that will provide an “affordable indulgence.” Whether it is a premium chocolate bar or a pre-prepared meal, consumers are looking for ways to reward themselves and make life a little bit easier. The convenience store format is the natural provider: products and services readily available on your local corner. People are willing to prioritize these things over low price. CPG manufacturers and retailers are taking notice.
The convenience sector first began its developing-world footprint in Asia’s mega cities, areas that are forecast to continue growing. The particular conditions of urban living are ideally hospitable to the convenience format. Consumers have less space and less time. In such an environment, demand for fresh, high-quality food and convenient time-saving offerings is higher than ever. Not surprisingly, convenience chains offer extended shopping hours, a widening range of both packaged and fresh foods, on-the-go eating solutions and ready-made meals that can be eaten in-store, or in spaces designed for individuals or small groups.
Despite the growth of the megalopolises, the region’s smaller cities, towns and rural areas will still host a significant proportion of the population for the foreseeable future – in 2025, 82% of the Southeast Asian population will still be living in cities and towns of less than one million. This makes the emergence of mobile technology important, because it’s the way consumers in smaller cities and rural areas are gaining access to a world they had only heard about from migrating relatives. Now, as they too enjoy rising incomes, their demands for quicker solutions begin to grow. The convenience channel is ideally placed to address such needs in locations large-format modern trade hasn’t entered yet. With their smaller footprint and a range of goods that cater to local needs, convenience stores can provide an easily-accessible, profitable “click and collect” offering.
This kind of solution will expand exponentially as connectivity increases exponentially in the region. Take Thailand: already, 90% of people in Greater Bangkok have a mobile phone; the numbers in smaller urban and rural areas are 84% and 78%, respectively.
In Taiwan, Korea and Thailand, convenience store numbers are steadily increasing. In these markets, convenience stores account for up to 25% of total FMCG sales. Further opportunity for expansion remains. In developing markets such as Vietnam and Philippines, convenience is just scratching the surface. As areas in these markets continue to urbanize and household incomes grow, the convenience proposition will become relevant to a broader population base.
Two developments demonstrate the great attractiveness of this format:
First, the larger players want in: We see channels beginning to blur as larger-format stores begin to move beyond their traditional wide-range/low-price format to include convenience offerings, too. Supermarkets are extending their hours, creating in-store dining areas, and adding more prepared foods and ready-to-eat meal offerings. In response, small formats are increasing store sizes, becoming more competitive on price and promotions, and expanding their fresh offering.
Second, convenience players are beginning to focus on innovating their offering and on private-label products. Whether it is in-store dining, more of the latest products or pre-paid SIM cards, convenience formats are beginning to bet on their ability to expand against the unmet needs and requirements of shoppers.
In Asia, convenience is the only channel to see growth at anything like the scale of e-commerce. Both deliver against the same fundamental premise – convenience – albeit in different ways. But groceries are always a slow-growing e-commerce channel, because it is harder for the consumer to monitor product quality, and the demand for near-instant delivery is very high. As a result, there is a best-of-both-worlds opportunity for convenience players to partner with e-commerce players to provide the opportunity for a quality check and fast pick-up to those who wish to order groceries online.
Khun O is enjoying all that convenience has to offer in Asia. But the future will consist of so much more than popping into the local 7-11 for a beverage or quick meal: As convenience becomes a way of life, the convenience store will become a physical delivery point for all sorts of needs, whether fulfilment begins with a commuter passing by, or with the click of a mouse.