A new Datamonitor report, the 24-Hour Society, says distribution is crucial in the transition to a round-the-clock society, as consumers demand convenience products to match their lifestyle.
Time-deprived consumers are also seeking convenience from the places they purchase products, fuelling the growth of distribution outlets such as petrol station forecourts and convenience stores.
Supermarkets have anticipated this demand and developed their own forecourts. Tesco has teamed up with Esso; Safeway with BP. Shell is the only petroleum company to have its own convenience store.
The grocery multiples are also moving back into town centres from out-of-town retail parks to capitalise on consumers’ on-the-move purchasing habits. As a result, these multiples are increasingly dominating “impulse” purchases, such as chocolate countlines, crisps and biscuits.
Manufacturers need to rethink their distribution strategies in light of the supermarkets’ domination across a range of distribution channels, including forecourts and convenience stores.
There are two convenience-driven purchasing opportunities: on-the-go expenditure, which is targeted by forecourts and convenience stores, and captive expenditure – taking the product to the consumer to provide maximum convenience and bypass retailers. Pizza delivery and online retailing belong to the latter category.
E-tailing is not yet regarded as a key distribution channel by food and drinks manufacturers and retailers, but its uptake in other consumer goods industries – from books and CDs to holidays and banking – has been remarkable.
The growing level of acceptance in these industries is a key motivating force for food manufacturers and retailers to develop an online retailing presence, providing them with 24-hour access to consumers regardless of opening hours legislation.
Datamonitor research shows the level of PC ownership in the UK is expected to rise from 14 per cent of households to 35 per cent by 2003. But regardless of whether consumers are surfing for information to compare prices or to purchase and order products, there are potential obstacles to growth. Difficulties with price comparisons, the perceived lack of security and an undeveloped delivery infrastructure need to be overcome.
But manufacturers and retailers remain sceptical about the value of online shopping. The cost of door-to-door delivery and the difficulty in transporting perishables over long distances are two major problems.
Manufacturers may find it is not feasible to sell “everyday” items through the Internet. Given that a large number of grocery purchases are impulse-driven, manufacturers remain apprehensive about online shopping’s impact on impulse purchases.
Manufacturers again face the likelihood that multiple retailers such as Tesco and Wal-Mart, and Net companies like Amazon.com, will account for consumers’ captive expenditure.
In addition, impulse-driven point-of-purchase sales of items such as chocolate countlines are likely to fall. Analysis of online retail sales reveals that shopping bills are about 20 per cent lower than those in store.
But the Net provides manufacturers with the opportunity to offer products that are not available in supermarkets, such as seasonal launches, gifts or speciality and premium ranges.
With the fall in traditional impulse sales, grocery manufacturers must concentrate on maximising captive expenditure. Vending machines are one way to take products to consumers to capture captive expenditure in, say, the office or an educational institution.
Vending has long been considered the poor relation of store retailing, however, technological improvements and high capital expenditure have increased consumer acceptance. In core impulse categories such as chocolate confectionery, crisps and biscuits, vending machine sales are growing at an average of 14 per cent a year.
Given the consumer trend towards eating on the move, there is a strong possibility that more locations will become viable vending sites.
With price wars raging and competition becoming increasingly fierce, manufacturers need to boost their presence across a wide range of distribution channels.
Food companies must slow down the increasing power of large retailers to achieve greater product and distribution differentiation for secondary and tertiary brands, and own-label.