Convenience stores were based on three things: confectionery, tobacco and newspapers. Sales of two of them haven’t been doing so well for years, and the government’s anti-obesity campaign is targeting the third.

No surprise as McColl’s, a hodgepodge of convenience store sites ranging from old-school newsagents to mini-Morrisons, went into administration on Monday. But Wm Morrison’s triumph over EG Group, the vehicle of the Issa brothers who own Asda, in a fight for an unglamorous retail asset shows the industry is not new.

McColl had a lot of problems. Traditional newsagents are a declining business. The future lies in a tailored selection of liquor, fresh produce and other specialist services such as post offices. McColl’s had too many old fashioned sites. To redress the balance, he bought 298 new stores from the co-op in 2016 for £117million. The deal didn’t work out well. He loaded McColl’s with a pile of debt that proved his undoing.

More broadly, McColl’s had an image problem. As Steve Dresser of Grocery Insight puts it: “What was McColl’s? Nothing in reality, as a brand name. The Co-op deal locked McColl’s in with stores that didn’t trade well under that well-understood identity. They didn’t trade better under the McColl’s name. The fact that McColl’s was halfway through a strategy that rolled out Morrisons’ brand image in place of its own in the form of “Morrisons Daily” stores shows how weakly it resonated with consumers. Although 16,000 jobs were saved through the sale, much of McColl’s portfolio appears destined to wear thin over time.

Ultimately, debt, supply disruptions and difficulty attracting staff in a tight labor market sent McColl’s into a death spiral. But the broader economics of the sector isn’t quite as bleak.

Convenience stores have had a good pandemic. More generally, they have had a good decade thanks to the decline of the weekly store and the weak inroads of fast delivery services. The sector developed before the grocery market. The total value of sales in 2012 was around £33.9 billion, according to the Association of Convenience Stores. In 2021, it was £43.2 billion. The Food Distribution Institute estimated last year that the sector would add an additional £5.5 billion in sales by 2026.

Unlike Tesco and Sainsbury’s, neither Morrisons nor Asda have successfully expanded in the region. Morrisons’ previous attempt in 2013, when it tried to turn Blockbusters into convenience stores, was a disaster. After two years he ended ‘Morrisons M’, suffering a loss of £30million.

This period could both be easier and provide useful growth a year after Morrisons’ own debt-laden takeover. These are stores with established footfall, not weird video rental sites. Morrisons already has a relationship with McColl’s, not only as a brand but also as a wholesaler. McColl’s switch to Morrisons Daily has so far resulted in an overnight sales increase of more than 20%, although this gap may narrow as conversions extend further down the store list.

There would have been costs to letting McColl go, however, including brand damage. “If McColl’s had gone bankrupt or been taken over by someone else, Morrisons’ supply deal would have been ruined and hundreds of Morrisons Daily stores would have had to be de-Morrisonized,” says Graham Soult, a consultant in retail. The acquisition of McColl’s avoids this risk and keeps the £1 billion wholesale contract in place.

For EG, the long-term attraction could have been to build a portfolio of commodities under the Asda label. With an empire built on debt and relentlessly, the Issas proved willing to bid for just about anything. Annoying a rival could have been an added bonus.

Yet the big chains sometimes struggle to make the calculations – and margins – of the industry work. These are local stores that must cater to very particular local tastes. It can be difficult for large national operators to adapt them to ensure that they are profitable enough. Mini-supermarket-style stores charging high prices to offset city center rents will likely find themselves vulnerable to a squeeze in consumer spending when there’s an Aldi or Lidl on the road.

Unlike flashy tobacco packets and weekday broadsheets, convenience stores will survive. Morrisons has a job to do to make the old McColl thrive.

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