Convenience stores could benefit from the pandemic-if they

Convenience stores could benefit from the pandemic-if they adapt ORNER Clance of many homes, open long hours and small enough not to require customers to linger too long inside. They no longer sell just basic necessities, such as milk, beer and sweets. And they offer other ser- vices, from charging e-bikes in South Korea to paying for online shopping in Mexico. On paper, this makes them perfectly suited to the pandemic. And in practice? Going into covid-19, convenience stores were a mixed bag. Some benefited as busier lifestyles, smaller households and ageing populations led more people to shop little, often and locally. They were the only brick- and-mortar shops in South Korea whose sales grew in 2019. Oxxo, a Mexican chain with some 20,000 outlets across Latin Am- erica, reported sales of $8.7bn in 2019, up by 10% on the year before. Minimarts, which mostly operate as franchises, have been opening in China, India and Thailand. Elsewhere they have struggled. In Ja- pan, home to the world’s three biggest chains, they have been in outright decline. The share price of Seven & i Holdings, the giant which owns 7-Eleven and accounts for a third of the industry’s $360bn in glo- bal revenues, has dropped around 30% over the past two years, as investors cooled on its saturated domestic market. Its two Japanese rivals, FamilyMart and Lawson, have been laggards, too (seechart). In many countries supermarkets have been mus- cling in on their traditional high-street turf. In September Asda, a British super- market, launched Asda on the Move, join- ing Tesco Express and Sainsbury’s Local. Despite the potential pandemic boost, performance this year has been similarly patchy. The average value per convenience- store transaction in China increased by 120% at the height of the pandemic, and stayed high. In Britain the Co-operative Group declared that sales rose by 8% in the first half, year on year, to £5.8bn ($7.6bn) thanks to its Co-op and Nisa minimarts. At the same time Seven & i reported a 12% drop in operating profits in the three months to August. FamilyMart lost money in the third quarter. oxxo’s parent com- pany, FEMSA, is also in the red this year. Although some pandemic shopping habits favour convenience stores, others do not. Rivals are offering the same goods for less and brought to your doorstep, often in an hour or two. Deliveroo, a British food- delivery app (part-owned by Amazon), fer- ries booze from supermarkets. In August DoorDash, an American one that teamed up with 7-Eleven in the pandemic’s early days, launched its own virtual DashMart. To fend off rivals, stores must evolve with shoppers’ changing ideas of conve- nience, says Amanda Bourlier of Euromon- itor International, a research firm. One American chain, Wawa, has opened drive- through stores. Another, Casey’s, has re- ported a surge in digital sales. Stores in South Korea and Japan, which face labour shortages, are toying with automated pay. ments. In America 7-Eleven now delivers online orders to homes, as well as public places like parks. But its parent has also bought Speedway, a chain of American pet- rol stations for Szibn. That adds 3,900 out- lets to the 9.000-odd 7-Elevens in America (and 70,000 or so globally). It is a big bet that petrol cars aren’t soon disappearing and nor are convenience stores Inconvenient truth Convenience store firms, share prices SOURCE: THe Economist 17 2020

BRISTOL AND TOKYO

In the light of the extract above, in which type of market structure (monopoly, monopolistic competition, oligopoly, perfect competition) would you classify the convenience stores on the basis of the degree of competition that exists and why.