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06 Mar
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The Great Supermarket Squeeze

It has been hard to miss the recent headlines about the changing market dynamics for supermarkets, with falling sales and profits for the ‘Big Four’ supermarkets and significant growth for the German discount supermarkets and high end brands.

Commentators believe that this is the result of the squeeze in household incomes and changes to the way that we shop for food, so that people are now more budget conscious and the trend is for people to visit a number of shops for different products, rather than undertaking the traditional weekly shop. 

What is actually happening with the ‘Big Four’? 

In order to understand what is actually happening with to the food sales market it is necessary to look behind the headlines and draw out the facts.  It is likely that there will be many more announcements throughout 2015 but the position at this time is:

Tesco

  • Closing 43 of its stores, including 18 Tesco Express stores, 12 Tesco Metro stores, 7 Tesco Superstores and 6 Tesco Homeplus stores. 
  • Pulling out of 49 pipeline stores.
  • Closing its head office. 
  • Continuing to invest in its Tesco Express format with new stores proposed for 2015.

Sainsbury’s

  • No store closures announced.
  • Reducing the pipeline of new store openings from 1m sq.ft to 500,000 sq.ft for the coming year, half of which will come from its target to open 100 new convenience stores a year. 
  • Cutting head office staff by 500.
  • Bringing click and collect to 100 stores.

Asda

  • No store closures announced.
  • Reduced expansion plans.

Morrisons

  • Closing 10 of its loss making stores.
  • Scaling back its plans for the expansion of its M Local format from 100 stores a year to 60-70 stores a year.

The Other Supermarkets

By contrast, Aldi, Lidl, Waitrose and Marks and Spencer Simply Food have ambitious growth plans:

  • Aldi is leading the way with plans to open 550 new stores by 2022, increasing its presence to 1000 stores across the country.  This includes plans for 60-65 stores for 2015. 
  • Lidl has plans for 30 new stores in 2015. 
  • Waitrose plans to open 14 new stores in 2015, 7 of which are convenience stores and 7 of which are supermarkets.
  • Marks and Spencer intends to open 150 new Simply Food stores over the next three years.

What does this mean for the future of supermarkets?

The dynamics of the supermarket market are clearly evolving and although it is currently a difficult time for the ‘Big Four’ supermarket retailers, with the role of the traditional supermarket changing, we are beginning to see opportunities being realised for them to streamline and evolve their business models. 

The ‘Big Four’ are looking at ways to make their stores more effective.  For example Tesco has announced that it plans to reduce the brands it offers by 30%.  This is also apparent through announcements of collaborations with other stores inside supermarkets.  At the end of last year, the first Sports Direct store opened in a Tesco’s store in Leigh and it was recently announced that Argos will open stores inside 10 of Sainsbury’s supermarkets.    

The rise of the C-store continues, so that even though retailers may be scaling back growth plans, there is a clear pattern of continued investment in this format, which sits more comfortably alongside the high end and discount market for those who undertake multiple destination convenience shopping.     

Supermarket retailers are also continuing to invest in online services and click and collect to complement the in store offer and drive trade, despite reducing in store sales. 

What about the supermarket land banks?

The supermarkets scaling back expansion plans means that much of the land that the supermarket retailers have been holding for new stores or extensions will no longer be required.  According to CBRE, 43.81 million sq.ft of land is underutilised by grocery retailers, where foodstores were proposed or planning permission granted.  Much of this will now remain undeveloped by the ‘Big Four’ as growth plans are shelved and many of these sites are in high value locations.  These sites present exciting opportunities for alternative development proposals, to realise value from these underutilised assets.    

Please contact us if you would like planning advice on any of the matters discussed in this blog. 

Image used courtesy of N i c o l a on Flickr

 

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