Skip to main content

Space race may hurt the big four more than they know

Retail analyst Dave McCarthy says that the big four UK grocers are planning to add 5 million square feet of extra selling space each year in the next four, increasing total floor space by more than 20 per cent by the end of 2014.

Are shoppers going to be spending 20 per cent more? Not likely. So what will the impact be? "It is inevitable that the big four will be going head to head more than at any time in history, with consequences for sales, profits and returns," says Mr McCarthy.

At first look, independent retailers may think this is terrible news. But that assumes that the 75 per cent market share of the big four can grow. The other side of the coin is that the big four have already reached the maximum share that they can reach and each new square foot of selling space will impact on their own profitability.

Two stories from local retailers this week bear consideration. Navin Bupthani assured me that a large Tesco Express near his shop was missing its numbers and feeling the pressure. The cause? Competition from a Waitrose convenience store across the road.

And Kay Patel tells me that a Tesco Express near his shop took just £5,000 in its first week - less than a tenth of its target.

"The long term effects of lower returns and weaker like-for-like sales are more severe and harder to reverse," says Mr McCarthy. He suggests the big four would be better off investing in a price war.

If you operate a well-run shop with loyal local customers and are prepared to invest in staying successful. then you don't need to worry too much about the multiples fighting each other. It may even present you with more opportunities to grow your own profitability.

Comments

Popular posts from this blog

Digital disruption in the UK wholesale space

“Twenty years ago I was driving boxes to the post office in my Chevy Blazer and dreaming of a forklift,” says Jeff Bezos in his most recent letter to shareholders. A blink later and he points out that the company has grown from 30,000 employees in 2010 to 230,000 now. But his ambition is the same. “We want to be a large company that’s also an invention machine. We want to combine the extraordinary customer-serving capabilities that are enabled by size with the speed of movement, nimbleness and risk-acceptance mentality that is normally associated with entrepreneurial start-ups.” Amazon is great at disruption because of its customers focus and the fact that the internet means it needs none (or very few) people between its warehouses and the shopper. The threat of Prime, its membership service, is the biggest challenge facing the UK retail market and the wholesale market by extension. It is both a direct threat and an indirect threat in that is inspiring countless numbers of othe...

Five things to learn from Waitrose

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...

The secrets of persuasion: No short cuts.

The best moment in my interview with Terri Sjodin, who teaches many of the world’s top corporations how to sell persuasively, is when she smiles at me and asks to hear my “elevator speech".   My mind literally goes blank. The author of Small Message, Big Impact , her new book on how to craft powerful messages that persuade people to listen to you, has thrown the gauntlet at me. There was nowhere to hide. I had just told her how I had used her book to write out my three minute speech to open the Local Shop Summit. She listened patiently to my pitch, thought for a moment, and said: “I bet you had an illustration in your mind of an independent who really capitalised on your ideas and has taken them to the bank.” I could swear she was reading my mind. I blushed and nodded. “So you should open with this story,” she said. “Start out by saying: ‘Let me open the conference by telling you a great story with a happy ending.’ So the audience will say to themselves: ‘He is goi...