Home Experience: The latest chapter for convenience

By Stephanie Rice.

If you think that consumer expectations of convenience food and drink has been changing rapidly, we haven't seen anything yet!

Over the last 20 years, the pace of change has been largely defined by the physical space shaping consumer expectations and demand. Convenience has changed from a small CTN store offering customers a place for distress purchases, to a small fresh food supermarket where customers can serial shop for their daily needs- without the need to plan ahead. The location of these stores has migrated from the neighbourhood where customers live, to urban locations where customers work- in order to offer solutions for ‘eat now’ fresh food and drink needs. These locations can offer such solutions in stores under 750 sq. ft., and so they have started to appear at train stations and in forecourts. Consumer expectations were raised and met by the arrival of small format multiples, but these expectations are not shaped by the size of the store- the products offered shouldn't be any less fresh or any more expensive than those found in their main supermarket. Consumers don’t want to only be offered small packs of ingredients for that night's dinner; they expect the same breadth of choice in all categories they require. Consumers do not expect their local shop to be any less aware of their changing needs, especially health and wellness, and they want to see this reflected in the product offer.

In the last two years, there has been a quantum shift in what consumers need from a convenience store; as Londoners eat more out of home and want more convenient locations for fresh, affordable take-out food. This has led to the emergence of ‘foodvenience', as described by Joe Bona in his informative article last year. This term now applies to a retail store that strives to give the public a highly convenient location: fast, efficient, take-out ready food, at affordable prices and with a wide array of consumable products and services.

So what next for London convenience?

Technology is enabling more and more innovation and is allowing convenience to embed deeper and deeper with consumers, at a faster pace than physical locations will allow. There are now apps to find a cleaner, a babysitter, a hotel, a taxi or a DIY job- there is more choice of suitable services at a cheaper rate than offered locally. Londoners are ready to embrace this when it comes to meeting their subtle and sophisticated food and drink needs, as they continue to work longer or more inflexible hours, do minimal meal planning and, for part of the week, seek minimum cooking skill and effort.

Review websites such as Yelp and Top Table have made consumers more discerning. They are looking to meet these needs in a number of different ways, which is leading to a merging of two traditionally different sectors of eating in the home and eating out of home. This new trend is being called ‘home experience’ and it is creating a river of cash for the evening meal opportunity, but only some of this is going to the traditional supermarket channels and currently very little to the convenience channel. Instead, disrupters have entered the market and are creating a whole new set of opportunities and threats for the traditional convenience channel.

Home Experience

Over the last five years, Londoners have started defining their homes as central to their well-being. Many homes are now personal entertainment centres with cinema quality TV screens; streaming the latest box sets, movies and sport. Sonos and Spotify have enabled people to enjoy high definition sound and the latest music downloads, while café style coffee machines enable us to enjoy barista coffee at home. This is fueling the rise of ‘at home’ informal entertainment with family and friends, thus avoiding the hassle and cost of going out.

Food in the digital era – convenience and quality

This need is being met in a number of different ways. Innovative recipe box services company “Hello Fresh” is an international meal delivery service, founded in 2011. They promotes themselves as “doing all the thinking and planning so you’re just left with the fun bit: easy home cooking and eating.” It is a consumer company working on high margins, apposed to a retailer that works with low margins, it sits between shopping and food delivery- with a direct supply chain to customers, so the products are fresher and exactly measured; thereby eliminating food waste.

Hello Fresh has raised £255m in funding and currently works in partnership with UK celebrity chef Jamie Oliver for recipe development. The market is expected to grow 9-fold by 2020 and the company is growing 400% per annum.

There are estimated to be 13,000 recipe box users, resulting in a downward trend in other forms of food expenditure: their spend on groceries fell by 2.8% over the same time last year, and their eating out fell by 2.2%. The growth of this service is a threat to the convenience sector.

The online food delivery market is expected to continue growing; 25% over the next three years. The largest companies are Deliveroo and Just Eat. It is estimated 183,000 users spend on these services, experiencing a boom of 45%. However, these users additionally spent more on other sources of food with an increase of 9.2% in grocery spend. This is an opportunity for the convenience sector to strengthen their on-demand proposition.

Just Eat acts as an intermediary for over 27,000 restaurants in the UK and is a leading Global market place for online food delivery. It offers time-poor consumers a simple means to have food delivered. It offers a clever use of GPS, lean operation and a rating system that makes the customer interface as simple as possible.

Unlike Just Eat which signs up any takeaway or restaurant, Deliveroo has positioned itself as a curator of quality restaurants selling quality food and has its own logistics network. This ensures that it can control the quality of the customer experience. It uses social media to tweet promotions and has recently joined forces with Jamie Oliver. The minimum order for free delivery is £12-15 and it is now the fastest growing company, averaging 25% growth each month since its launch in 2013. It has recently launched a 20min alcohol delivery service, working with Majestic Wine, Brew Dog and over 70 independent alcohol merchants. The key attributes of this market are:

The market is seeing dramatic channel migration. AmazonEats and UberEats have recently launched competitive services which are both focused on the quality proposition. Deliveroo has just launched Deliveroo for Business to give companies some control over the number of Deliveroo orders made to the office after hours and put on expenses.

To date, supermarkets are purely focused on the ‘eat at home’ offer and have looked at ways to enhance the ‘at home’ experience. The highly successful Dine In for £10 meal deal which allows customers a choice of a main, a side, a dessert and a bottle of wine for £10 as a meal for two option has been adopted by almost all the major multiples including the discounters. Waitrose has taken this one step further and launched an ultra-convenience meal-kit-bag into 20 trial stores to help its customers cook fresh dinners from scratch. The ingredients, which include some ‘unusual’ ones for what it describes as ‘exciting meals’, are measured precisely to eliminate waste or leftovers. This is a small response to the growth of the recipe box users described earlier.

Tesco’s latest ad campaign launched last month focuses entirely on the quality of its food as ingredients and what can be done to create delicious meals at home. Customers can access recipe cards to re-create the recipe. YouTube is enabling all of us to create restaurant quality meals at home in under 30 mins using an Iphone or Ipad. This move is in response to customers’ demand for natural food which has not been processed outside of the home and is therefore fresher, more flexible to allow for allergies, preferences and ultimately cheaper.

Stephanie's top tips

Food techs are empowering customers, whether by providing them with the ability to purchase high quality and ethical produce, or simply by giving them time back by making the takeaway process more streamlined - all in the comfort of their own home or on the way home. The simplified rating system applies the wisdom of crowds to a sprawling urban restaurant eco-system. So how can convenience stores compete?

Contact Stephanie for her top tips on how to compete with these food techs and to utilise her expertise on all that is Home Experience here. You can start by asking yourself these questions:

1) What can't these new food techs do?

2) How can you work in partnership?

3) What is your current USP?

4) How much would it cost?

5) What home experience offer do you have now in-store?

6) How can your stores work with these new supply chains?

7)Does your grocery product range compare to the ingredients offered in recipe meal kits?

With a critical mass of food entrepreneurs establishing themselves in London, the capital has the most diverse eco-system in the world. This in turn has created a boom of food tech start-ups and we will be seeing plenty more innovation in the near future.

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Stephanie RiceStephanie Rice Insight Representative for the London market.

Stephanie works with leading UK convenience retailers and suppliers to shape their customer proposition. She has run her own consultancy practice, advising on strategy projects at main Board level for many years and is a recognised industry expert. Her unique London market expertise is highly relevant to Insight's clients looking to develop innovative propositions.

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