Click and convenience: the future of supermarket shopping?

As developers endeavour to progress large retail construction schemes in towns across the UK, two main channels are growing increasing prevalent within the supermarket sector: convenience and digital.

The Institute of Grocery Distribution estimates that between 2012 and 2017 sales at superstores will grow by just 6%, approximately £3.3billion. In comparison over the same period, takings at convenience formats will rise by more than 28%, while discount retailers will see a growth of 65% and online a breathtaking 97.7%.

Glenigan retail experts Kate Guildford and Sue Spencer take a closer look at these trends and how the major players in the supermarket sector are reacting to them.

The ‘big four’

After a relatively late entrance to the convenience market, Morrisons is now on track to have 100 M Local stores by the end of 2013 and 200 M local stores operational by 2015, along with new full-size stores and rebranding existing premises. Glenigan data indicates the retailer currently has 56 projects in progress, with a net floor area of 241,033 sq m. In July Morrisons and Ocado formally completed a £216million licensing agreement that will allow the supermarket chain to launch an online grocery service by January 2014.

Tesco has also had to review its convenience strategy. In April this year, the retailer advised that it was to ditch plans to open more than 100 major new stores after announcing its first fall in profits in 20 years. It then advised that it has sites for up to 830 more convenience stores across Britain.  But by October, Tesco had reported a 23.5% drop in profits. Despite this, the retailer has 148 projects in progress on the Glenigan database, leading the ‘big four’ in terms of development, with an approximate total value of £914million.

With Sainsbury’s annual sales recently clearing £1billion for the first time, the supermarket giant announced it was expanding its convenience store business across the UK. In March, Sainsbury’s operated 523 convenience stores nationwide and chief executive Justin King outlined plans to increase its network to 1,000 local premises.

As Sainsbury’s continues to expand its online grocery business, it recently announced that it is to open its first “dark store” at a former Royal Mail depot in Bromley-by-Bow, East London (Glenigan ID 13344138).

Dark stores are large warehouses with interiors laid out like supermarkets to allow staff to easily compile orders. Tesco is opening its sixth such store this month in Erith, South East London (Glenigan ID 12206509), and just received planning permission for another near Abingdon, Oxfordshire (Glenigan ID 13186826), while upmarket supermarket Waitrose recently announced its second dark store in Coulsdon, Surrey (Glenigan ID 13017211), due to open late 2014.

Asda has also chosen to invest in digital developments and in April unveiled a £700million expansion plan, with 10 new stores due by the end of the year. The retailer will also provide the first supermarket same-day click and collect grocery service and wants customers to be able to collect their grocery shopping from almost 200 outlets by the end of this year, including stores and lockers at Asda petrol stations. As part of its tactic to add new methods of collection for online orders, Asda will allow shoppers to pick up online non-food orders in 20 of its shops and it is scouting business parks, universities, train stations and park-and-ride schemes for additional collection locations.

Pressure on the major supermarket chains has come from both the budget and high end supermarkets, with Sainsbury’s the only one of the ‘big four’ to increase its market share in Q3.

Premium food retailers

At the top end of the market, Marks & Spencer and Waitrose remain the main contenders. In May, Marks & Spencer advised that it would stop opening general new stores in the UK but will continue to progress with its smaller Simply Food outlets, opening 150 new stores over the next three years. Chief executive Marc Bolland insisted the retailer has no plans to extend its business into online groceries.

Waitrose has increased its market share from 4.6% to 4.9%, and now has nearly 300 shops throughout the UK. During 2013 Waitrose will have opened up to ten new supermarkets and ten new Little Waitrose convenience shops.

Discount supermarkets

Of the discount supermarkets, Aldi was the biggest winner this year as its market share leapt from 2.9% to 3.7% in the last quarter, with Lidl’s market share increasing to 3.1%. Aldi has been enjoying sales growth of more than 30%, outpacing its upmarket rivals, and opening new shops at the rate of two a month. In June, it was named ‘Best Supermarket’ at the Which? Awards and ‘Grocer of the Year’ at The Grocer Gold Awards. Lidl has created up to 50 stores in 2013, and currently has a presence at around 600 locations in the UK.

High street supermarkets

High street staples The Co-operative Group and Iceland, are also expanding. The Co-operative announced plans in August to trial an online shop, as the last of the ‘big six’ supermarkets to make the move online. According to a spokesman at the Supermarkets Conference in June, customers will also soon be able to collect their Amazon goods ordered online from their local Co-op store.

Iceland, which pulled its digital operations eight years ago, has also just re-launched its e-commerce site, with 40 more supermarket openings planned for 2013.

For more information about retail construction, speak to Kate Guildford or Sue Spencer on 0800 373 771 or email kate.guildford@glenigan-old.thrv.uk or sue.spencer@glenigan-old.thrv.uk

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