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Wouldn't convenience stores be even more convenient — and profitable — if they sold the same high-quality perishables found in full-size stores? And wouldn't grocery chains prefer to get food dollars out of smaller, convenient locations than lose them entirely?

These are questions that Sainsbury, the British grocery leader, seems to have answered in the affirmative. The chain has scored a hit with Sainsbury Local, a small-store, mostly urban format offering not just snacks and fast service but fresh fruits and vegetables, prepared foods and salad bars. Eleven of its 20 best-performing stores are Locals, and it is adding 100 more in Shell stations throughout Britain.

The trend could turn out to be peculiar to Britain, where there are tough barriers to building large supermarkets like those common in U.S. shopping centers. Still, it may offer lessons for American retailers. “The convenience field is one that is full of opportunity right now,” says Mark Husson, a Merrill Lynch analyst.

Husson doesn't think U.S. retailers should go directly into the convenience store business. But he does believe they could profit by developing smaller store formats that emphasize their own brands of quality perishables, in locations — often urban — that would be more convenient for shoppers than supercenters.

One impact might be renewed interest in older supermarket properties that were abandoned as chains moved into bigger digs. “A lot of what were deemed too-small stores will be workable,” Husson theorizes.

There are doubters. Meredith Adler, a food and drug retail analyst with Lehman Brothers, says the British success with small-store formats “is a function of the real estate market in the U.K., where real estate is limited.” She's not sure the trend will translate to this side of the Atlantic. And while many food retailers are scaling back store sizes, she says the reason is a desire to lower costs, not necessarily to make shopping easier.

Jason Whitmer, an analyst with FTN Midwest Research in Cleveland, agrees that change in formats is coming to the U.S. grocery industry in the next decade, “but none of this is really on the radar right now.”

Husson, meanwhile, believes Kroger is in a strong position to try a branded approach in a convenience-store setting: It already owns nearly 800 convenience stores under the names Kwik Shop, Quik Stop Loaf n' Jug Mini Mart and others.

TAGS: News Retail
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