Things are certainly getting tougher for the independently run dépanneurs and variety stores that dot Canada’s urban landscapes. Since 2008, 2,252 convenience stores have closed across Canada and the majority of those affected were independently owned.
The Canadian Convenience Store Association estimates stores lost $254 million in 2012, compared to profit of $1 billion in 2011.
Its annual state of the industry report points to a more competitive environment for the industry, with big companies such as Shoppers Drug Mart encroaching on the sector after its purchase by Loblaws.
There is also more chain ownership, with companies such as Alimentation Couche-Tard Inc. spreading its footprint. Of the 23,000 convenience stores in Canada, about 45 per cent were independently owned in 2012, down from 48 per cent the previous year.
Alex Scholten, president of the CCSA, said independent stores are getting squeezed, not only by competition, but also by rising credit card fees, contraband tobacco and regulations constraining the industry.
“What we’re seeing is a trend in the industry where the small independents who are not changing or adapting to the Canadian environment are going out of business. The chains are becoming more prevalent in the industry, so we’re seeing a shift in the nature of the industry and who’s in it,” he said in an interview with CBC’s Lang & O’Leary Exchange.
But he believes even small independents can be competitive, if they get some fundamentals right.
“Convenience store operators have to recognize what their strengths are. Our primary strength is time – we know the consumer out there is time-strapped and as long as we are able to get them in and out of the store quickly, offer them products they’re looking for and make sure that prices are not at a level that is insulting to them, I think we can continue to compete,” Scholten said.
Need to innovate
He said it will take some innovation to stay ahead of the new competitors emerging in the market.
“One of things in our state of the industry report this year, we noticed that over 90 per cent of the stores that offered fresh food or food prepared on site were actually in a profitable position,” Scholten said.
One of the industry’s big concerns is high credit card fees and the industry association is looking at ways to expand debit card use in convenience stores, he said.
A loosening of provincial liquor laws might also provide a new way to attract business, he said.
“Certainly having the ability to offer a new product area, such as beer and wine outside of Quebec and Newfoundland where those are available, will offer a big advantage to our industry as well,” Scholten said.
He also points to the estimated 868 federal, provincial and municipal regulations that affect convenience store operators in Canada on everything from tobacco sales to taxation and said the CCSA is pushing for a more streamlined regulatory regime.
“By eliminating out of date regulations, simplifying others or avoiding new, unnecessary regulation, we could achieve major improvements to the profitability of our members and to the Canadian economy in general,” he said in a press release.
“For this reason, we are calling upon governments to alleviate this burden, which we believe will trigger the creation of thousands of jobs and preserve a unique family business model that generates billions in tax revenues for the government."