Sovereigns, sport and cigs: why 2012 could be a bumper year for indies

Could 2012 be the year of the independent retailer? There’s turmoil in the Eurozone and retail sales figures are disappointing, but commentators are forecasting a bumper year for indies.

Booker, for example, predicts 2012 will be the biggest year for indies since 1994 when the National Lottery was launched, while Bestway believes retailers could increase their sales by at least 25%. So why are they so confident? And how can indies take advantage?

A culmination of special events and sporting fixtures spread across the year, the first big ‘event’ in 2012 for the sector will be the tobacco display ban, which comes into force in England on 6 April. From this date, larger stores, including the multiples, will have to hide any tobacco products from the view of the customer. Smaller c-stores, however, will be exempt from the ban until 2015.

Cash & carry giant Booker has dubbed 6 April ‘D-Day’ and predicts a £1bn windfall for the indie sector. It believes smokers will choose to buy their tobacco from stores where they can see the products and to avoid the longer queuing times the ban is expected to create.

“We predict £500m in tobacco sales will move to the independent sector,” says Booker sales director for retail Steve Fox. “Tobacco customers will also contribute a further £500m to retailers’ turnover by purchasing products from other categories, therefore we believe the tobacco display ban could boost turnover in independents by £1bn.”

Smokers are big business for c-stores because they spend more money than non-smokers. According to Him! the spend is 65% more than for the average c-store shopper (£9.05 versus £5.47). That’s partly because 70% buy more than just cigarettes, but they also visit more often - 4.3 times a week against 3.7 times a week for a non-smoker.

Patrick Toms, head of the distributive channel at Imperial Tobacco, says: “Display bans in other markets have given us some key lessons. In the large stores that don’t get it right, availability is heavily affected and shop staff often take longer to serve customers. This gives independents an important three-year opportunity to retain their customer base and attract new customers.

But that doesn’t mean small stores can just sit back and enjoy the ride, says Toms. “Independent retailers and leading fmcg companies alike need to be prepared for this and from what we have seen in other markets, on-shelf availability for all categories increases in importance in a display ban environment.”

Availability will also be key during this summer’s sporting bonanza, with the long-awaited London 2012 Olympics, plus Euro 2012, in which both England and the Republic of Ireland are represented.

Buying groups are gearing up to make sure indies are fully supported and offer competitive deals for the key sporting events.

Nisa, for example, is running two promotional campaigns. Sporting Chance will cover the first seven three-week trading periods of 2012, linking product promotions with competitions for customers to win tickets for sporting occasions such as Six Nations rugby, the Grand National and the FA Cup final. A Summer of Sport promotion will then run from periods eight to 11 to cover Euro 2012 and the Olympics. “These promotions take in all the major events and should provide a real sales driver for retailers,” adds John Sharpe, MD, central distribution, trading and logistics at Nisa.

The golden opportunity with the Olympics, believes cash & carry wholesaler Bestway, is that the event will actually run from mid-May when the Olympic Torch Relay starts a 70-day journey through more than 1,000 villages, towns and cities across the UK. Bestway is currently finalising its plans to help indies stimulate local communities into planning events.

Indies are also being encouraged to play a leading role in organising street parties for the Diamond Jubilee in June. Commentators have predicted scenes similar to last year’s Royal Wedding, when many more than predicted took advantage of the good weather and the Bank Holiday to hold impromptu street parties.

However, indies are warned success will only come to those who are fully prepared. “Stocking the right products for celebrations, whether they are holding street parties or just family events built around celebrating, will be the secret of success,” predicts James Hall, controller for Bestway’s symbol fascia Best-one.

Philip Jenkins, managing director of the confectionery buying group Sugro UK, believes that although 2012 could be a “potential step-change” for the independent retailing sector, the retailers will have to be the ones to make it happen.

“I would expect them to be far more aggressive in presenting and promoting their store than they are now,” he says. “The public has to know they’re there, and once they get people through the door, they’ve got to make sure they return by offering the highest store standards, strong promotions and 100% availability of the top 10 products in the most important categories.”

Corin Birchall, a retail expert at Kerching Retail, agrees: “Independent retailers need to take their lead from the supermarkets, preparing great-value offers and strong promotional materials, linked to 2012 events, well in advance.

“Success is still largely dependent on an individual retailer’s understanding of local residents’ needs, so independent grocers need to continue working to attract, convert and keep customers.”

Indies are off to a good start. Data shows symbol stores and independents grew sales by 5.6% in the past three months, a figure beaten only by Waitrose and the discounters [Kantar Worldpanel 12w/e 27 November 2011]. The sector will be hoping this figure continues to rise over the next 12 months.