nickshanagher

In its second feature on Tesco this week, the Financial Times discusses Terry Leahy's vision for 10,000 small convenience stores "on every junction of every major city in the US". His working name for the chain was Fresh & Easy. Interviewing the executive who Sir Terry picked to develop Fresh & Easy, Colin Smith, the newspaper finds that after 18 months of research his team came up with a vision very close to that of Sir Terry. The gap was for neighbourhood stores selling fresh, cheap food and that was easy to shop in terms of range and location. The target sales density was between $14-$20 a square foot, above the US average of $10 a square foot. But most US stores are much bigger than the Fresh & Easy model. In contrast, the UK Tesco Express stores achieve £20-£30 a square foot ($31-$46). The speculation is that Tesco may give up on F&E because it can make more money in Asia, where its incoming chief executive Philip Clarke has made his name. Howev...

In an article for Retail Express last week assessing Morrisons plans to open three convenience stores next year, I recounted a short walk that I took up Clapham High Street earlier this month, passing by a Sainsbury's Local, then a Tesco Express, then a Sainsbury supermarket. It is clear that these stores must put pressure on local shops. But also on each other. This week, the Financial Times is running a series of features to celebrate Terry Leahy's achievements at Tesco. The first feature includes the following observation from City analyst Dave McCarthy who says he cannot see how Tesco can continue to open 2 million square feet of new selling space a year without "significant cannibalisation" of its own sales. At the same time, Mr McCarthy says there is no "soft underbelly" to competitors to help feed Tesco's opening programme. Local shops, as the Kantar Worldpanel figures show, are holding their own. At least those that are investing in their...

Asda has permanently lowered its price for four pints of milk from £1.53 to £1.25. Tesco says it will respond. Robert Wiseman Dairies, which supplies almost a third of the UK's fresh milk has had to issue a profits warning. This year its profits will be cut from £43m to £36m. Next year from £44m to less than £20m. A third of its revenues come from convenience stores and two thirds from supermarkets. Interestingly, after years of consolidation was assumed to have led to a stable supply chain for milk, Clive Black of Shore Capital told the Financial Times that in liquid milk "competition now seems to border on the irrational." The strategic importance of convenience stores to suppliers can only increase. Local shopkeepers will hope that suppliers like Robert Wiseman will continue to have the wherewithall to invest in their business too!

Interim results from Waitrose this week confirm the industry figures that show the upmarket supermarkets and convenience stores are leading the market (albeit from a 4.2% share according to Kantar Worldpanel). Charlie Mayfield, the chairman, highlights many reasons for its success and here are five that local retailers should consider. Marketing works. Waitrose claims that more than 370,000 extra customer transactions resulted from its spring tie-up with Delia Smith and Heston Blumenthal in the first eight weeks. This autumn, it launches a cookery school. Engaged shoppers are more profitable shoppers! You need a value offering. 17 per cent of Waitrose sales are from its value range, called essentials. Momentum works. Its strategy is to bring Waitrose to more people in more places. It invested in 75,000 square feet of extra selling space in the first half of this year, including three convenience stores. In the second half of the year, it is adding eight convenience stores. Str...

Talking to a retailer in Ireland last week about how to spot a good investment opportunity, he suggested that there are three things to look for: elderly existing owners poor organisation of the shop tired-looking and dirty. The list is useful as it also serves as a warning to shop operators that the basic disciplines of a good shop need to be maintained: clean floors good lighting. Local shops are good at adapting to new opportunities but are they as good at letting go of the opportunities that have passed. Do brands that no longer sell stay on your shelves? Do you tell yourself that you are keeping this as a service to your shoppers? When you have to dust a stock keeping unit, that tells you something about its profit potential (expensive jewellery excepted!).

Visiting this central Dublin convenience store last week, I was struck by the investment in space. Across the road from a Spar offering pretty much the same mix of top up shopping, food to go, and eat in, the shops are massively different in terms of feel. I hope that this video helps you to see the attractiveness of the Centra/Dame cafe solution. In tone, it feels like a Waitrose.

This week's Scottish government proposal for a minimum price for alcohol of 45p a unit is likely to unleash a new wave of legislation as politicians around the world vie for credit in saving lives. The impact of regulatory interference will change the dynamics of local shops. If the proposal goes ahead, the Scottish government expects that retailers will gain an extra £90 million plus a year in revenues. What it does not know is whether this will stick with the retailer or by grabbed by the manufacturer. Its assumptions also assume that people will continue to buy alcohol in the usual places. However, from the world of tobacco, retailers can see several issues that the Scottish government ignores. Firstly, by creating an articificial price for a product, legislators create a business opportunity for people who work outside the law. The bigger the differential, the bigger the opportunity. At 45p, the politicians think they might reduce consumption by 4.7 per cent. However, the...

The Sun devoted 34 words on its business page to talk up the latest quarterly results for "independent" symbol group Spar. Its 2583 outlets achieved a 3.1 per cent rise in sales in the quarter to the end of July compared to last year - "in contrast to a fall at the rival Co-op chain", added The Sun. Industry data shows that around 30 per cent of the Spar universe are multiple outlets but as it markets itself as Britain's biggest group of independent neighbourhood stores there are clearly lessons for other local shops. The Co-op has spent billions in its aim to dominate the local shops market but clearly is being outperformed. Spar gives four reasons for its success: a substantial increase in the numbers of promotions, up 28.8 per cent year on year building its own label range, up 4.4 per cent improving its fresh food offering, up 3.9 per cent redeveloping its wine portfolio, up 3.5 per cent. The first two of these trends are evident in most local shops,...

Most local shopkeepers are uncertain if they are making enough profit from their sales. Benchmarks are hard to come by. In the news, all we hear about are the companies that make vast fortunes - or lose them. Money buys you a little happiness, Nick Powdthavee writes in the latest issue of FT Weekend Magazine. "According to economist Richard Easterlin, part of the reason for this is that we care a great deal more about what other people earn than we do ourselves," he explains. "For those whose most basic needs are already met, money buys additional happiness only if it can lead to higher status in society, which is hard when everyone else is getting richer over time." Bob Phibbs , whose blog on the worst case of local marketing is fascinating reading, has worked out that the average American business makes about three cents on the dollar in profit. "Yes, that is a really good business in average times," he says. It would be useful to hear from UK co...

Fears about the digital future sweeping over the local shop may be overdone, based on three reports I read this week. One from a newspaper and two from blogs. Firstly, in an article about on line shopping, the FT pointed out that the mechanisms of the internet are very like the mechanisms of the real world, with web sites using vouchers and one day specials to generate sales. The FT concludes that it is better to be a data aggregator, like Facebook, than a retailer trying to sell stuff on the back of the data. At almost the same time, one major bank was writing down the value of Ocado, the on-line retailer, saying that it needed to achieve orders of more than £100 a time to make a profit. That is a big average basket size. Other banks did not share this view but it still puts a question mark over where shopping is headed. Meanwhile, Seth Godin was busy writing about his frustration with Apple's i-pad store, where the shelves have more than 24,000 apps to buy yet the "fro...