Blog

07 Oct
Supermarket By Matthias Mueller Via Flickr

Falling Grocery Prices and Planning

Earlier this week I wrote how Brexit has impacted upon the retail market (a link to this blog is available here).

In this blog I talk about how grocery retailers have been embroiled in a price war which has slashed margins and in turn, led to higher import costs and general supply chain costs spinning off from leaving the EU.  This could mean that grocery retailers have no option but to put up prices again post-Brexit.

The extent of those price cuts has been highlighted on Wednesday on Page 46 of The Times, which reported on the findings of the British Retail Consortium.  Food prices fell by 1.3% in September, the highest year-on-year fall ever recorded for food, and only the second time that food prices have fallen by more than 1% since the index began.

British Retail Consortium chief executive Helen Dickinson said: “We are now in the fourth year of falling shop prices, so the record-setting run of shop price deflation continues, which is great news for consumers. This is as a direct result of the intense competition and transformational change in the retail industry, with consumers having access to more choices and greater ability to compare prices than ever before.”

Separate research by mysupermarket.co.uk has revealed that a basket of 35 popular items cost 16p less last month than it did in August. At a total of £83.19, this is more than 3%, or £2.74, cheaper than it was at the same time last year.

Gilad Simhony, Chief Executive of mysupermarket.co.uk, commented:

“The price wars between the retailers appear to have overcome any inflation issues caused by weaker sterling.”

At the same time as these price differences are being announced page 5 of Retail Week (30th September issue) has run an article in which UK and Ireland Chief Executive of Aldi, Matthew Barnes has said that Aldi's contract with its customers is it low prices.  He is quoted as saying:

"It [margin] may decline further but I am absolutely clear we will not be beaten on price.  That's our contract with our customers."

When asked if the retailer would go into the red if necessary his answer was:

"If losses are an inevitable consequence then yes, but I do not foresee that on the horizon."

Aldi have stuck their head above the parapet and committed to maintaining their price promise in the face of potential cost increases.  Therefore, it is likely that other retailers will be forced to follow suit.  We are now in a time when the consumer is informed and savvy and happy to shop around.  Price promises and price cuts have also become the 'norm'.  For Aldi's competitors to follow a different path would be to potentially face a drop in market share.

But what does this mean for property?  If prices are going to be kept low, then costs need to be kept lower.  Grocery retailers could become more bullish, for want of a better word, on what costs new stores/developments can absorb.  As town planning consultants we must be prepared for more negotiations on planning obligations and conditions and keep our services competitive.

NJL has a strong retail planning team who have a track record of delivering planning consents for a range of in-centre and out-of-centre retail proposals.  Please contact us if you would like more information.

Images courtesy of:

supermarket by Matthias Mueller via flickr

UK Sterling bank notes and coins by Mark Hodson via flickr

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