Tesco’s recent results have showed a profit fall for the first time in 20 years. The UK’s largest supermarket’s strategy of opening big out-of-town superstores – known as the ‘space race’ – has stalled as the retailer now seeks to focus on convenience stores and its booming online business. The move to convenience store formats, forecast to grow by 29% in the next 5 years, is now becoming a key driver for the major supermarket chains.
In recent weeks, discount supermarket Aldi has made its first forays into convenience selling, keen to grab a slice of the burgeoning supermarket format which has been dominated by Tesco and Sainsbury’s for the last few years. Industry analyst IGD has predicted that convenience stores will grow from revenues of £33.9 billion in 2012 to £43.6 billion in 2017, as consumers increasingly want more flexibility in location and opening hours.
Commenting on the rise of convenience stores, Waitrose Director of Convenience Jackie Wharton has said, “We believe there are still around 6 million people who want to be able to shop at Waitrose but don’t currently have access to one. There are still many parts of the country where customers cannot access the Waitrose brand easily and convenience is key to unlocking much of that opportunity.”
Bryan Roberts, Director of Insight at Kantar Retail, says the big weekly shop is now in decline for a variety of reasons – the increasing trend for online grocery shopping a key factor. “The growth in online grocery shopping is adding to consumers’ need to make more frequent top-up trips or call in for last-minute essentials, while food-to-go is also on the increase. In addition, the growth in single-occupancy households, and the number of families with two parents working, is strengthening the trend.”
Such changes in consumer lifestyles is being reflected in all the major supermarkets’ growth plans. Whilst Tesco is putting the brakes on superstore expansion, the retailer still has 830 sites in its development pipeline across the UK, the vast majority of which will be Tesco Express stores. Many will be built with collection points where customers can pick up goods ordered online, part of Tesco’s plan for a ‘multichannel future’. Morrisons has also recently snapped up key store locations from failed retailers Blockbuster, HMV and Jessops as it seeks to accelerate its convenience store offering, with Co-op opening 100 new stores a year and Aldi planning 50 c-stores later this year.
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