The changing structure of ‘grocery’ retailing in the UK.

Today’s report by The Local Data Company illustrates further changes happening in the structure of and presence of UK retail. It follows their report on the changes in number of supermarkets and the discounters. Both reports analysed the change in supermarkets, convenience stores and discounters in over 1,400 towns up and down Great Britain from 2010 -2015 .

 

So what is the data telling us?

The overall story is one of relentless growth in the longer term with supermarkets increasing store numbers by 570, discounters by 1,487 and convenience stores by 2,809. So the actual numbers are not insignificant, especially when combined. However it is the percentage increases that are of note as whilst convenience stores have grown by the most units their total increase is 21% versus 33% for supermarkets and a whopping 52% for the discounters.

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So the market has not only grown but it is the discount offer that has had the greatest impact by both number, offer and disruption.

 

Can the growth continue?

Analysis of annual change shows that back in 2012/13 convenience stores were growing at over 1,000 new stores a year but in 2015 this growth dropped considerably to just 300 new stores. A similar picture can be seen for the supermarkets who grew by 117 stores in 2012-13 but last year this dropped to just 38. The discounters have not not only maintained their presence but accelerated it. In 2012-13 discounter stores increased by 256 shops and accelerated to 344 new stores in 2015.

 

What is driving these changes?

It is common knowledge that consumer confidence and spend has been subdued for a number of years. So whilst the number of stores has increased significantly the spend has not. This presents a critical issue for any retailer and that is one of profitability as market share has been the focus for many years and this has been at the expense of profits.

The larger operators are not only having to discount more than ever before but have significant costs of operating smaller convenience stores, the logistics network to support this as well as a full blown online grocery operation. The significance of this was seen by Morrisons’ entry into convenience retail and then its exit having opened over 130 convenience stores many in ex Blockbuster stores.

 

Stormy waters ahead?

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The data clearly shows that change is afoot and this is clearly shown in the LDC report 228 towns have seen one or more convenience stores close. Example towns include Dunstable, Harlow and St Leonards on Sea. Whilst online has had a big impact on comparison goods retail, where online sales account for c.15%, yet in grocery it is just 6% but growing fast. This is no doubt the opportunity that Amazon Fresh have identified and will attack with the usual Amazon vigour and investment. Online grocery is forecast to grow from £9bn to £15bn by 2020.

So any CEO in the grocery sector, be it Mars Bars or lettuces that they sell, has challenging times ahead as at the end of the day it is profitability that is the key to success and often the market has been driven by sales and market share.

Add to this the fact that we eat out more than at any time in the past, we drive more cars than ever before and our drive for consumers is experience and service tied to aspiration then this makes for a heady challenge for any retailer but especially the grocers.

No longer is the food shop seen as the core shop of the week. Many see it as an inconvenient necessary, a chore and often an inefficient expense when drive towards multi buys and other deals that end up in the bin.

Let’s bring theatre and fun to the food shops as seen by the Stu Leonards chain in America that is as much of a theme park than a supermarket.

You can view infographics which share the report findings by clicking on the images below:

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Infographic_Convenience

 

 

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