Johannesburg - Woolworths would use the accelerated roll-out of stores at petrol station forecourts to grow its footprint in areas where it had a low density of stores or no stores at all, a retail analyst said yesterday.
The food and fashion retailer opened its 50th Engen forecourt store, known as Foodstop, in Sea Point, Cape Town yesterday. It announced that it would start its accelerated plan to open 45 additional forecourt stores by June 2016, bringing the total of Foodstop outlets to 95.
The group expects Foodstops’ turnover to grow from about R600 million to more than R1 billion in 2016.
Jean Pierre Verster, an analyst at 36ONE, said Woolworths could run the risk of cannibalisation if more were opened in urban areas such as Gauteng. However, the retailer is likely to look at routes, towns and other areas where there is a low density of Woolworths stores.
The firm said by expanding the forecourt model, its products would be available at new locations, particularly outside urban areas.
Verster said the roll-out of the format could be due to Woolworths completing the buyback of franchisees, which complicated the roll-out of forecourt stores before. He agreed that forecourts are easy to set up and have a low-cost base, which will allow Woolworths to introduce itself to people who never had a store close to them.
“This will help Woolworths test the viability of opening up a bigger store in smaller towns as they grow the brand beyond the major urban areas.”
He said not all forecourt stores would be profitable, and (that) will depend on the range of products in that store.
“The replenishing of the products in the forecourt store is tricky because range is limited and makes the cost of replenishing higher due to greater travel distances and smaller lines.”
But he said Woolworths was good at convenience and packaged food offerings, which was perfect for a forecourt store. He pointed out that such offerings could be a greater challenge for other retailers, saying that the idea of selling fresh fruit and vegetables is not viable.
Pick n Pay, which has 17 forecourts stores in partnership with BP, said it planned to open about 120 in the next five years. Fruit & Veg City, in partnership with Caltex, plans to open about 300 in the next four years.
He said filling station stores generally made money so profits were achievable.
Woolworths group director for retail operations Paula Disberry said: “Woolworths and Engen are complementary, market-leading brands that attract a similar customer who demands quality and convenience. The forecourt model is attractive as not only can our customers shop for Woolworths food around the clock, but the Engen forecourts allow us to reach new customers.”
Woolies shares rose 0.90 percent yesterday to R73.96. - Business Report