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The Grocery Space Race - is it over?

14/11/2013
Chris Keen Director, Supermarket Landlord Advisory - CBRE UK

One of the basics everyone knows about property is “Location location location.” This has been especially true for supermarkets as they have sought to get as many locations as possible. This is both to build the brand and to prevent the competition getting too close. But as companies have said they are scaling back their property pipelines is this the end for the supermarket land grab? In this video Chris Keen looks at whether or not this is true and how the grocery market is changing.

The first thing he emphasises is that the competition is still there. What has changed is the approach. Companies seem to be focusing more on convenience stores rather than the traditional larger sized supermarket. Furthermore a lot of supermarket chains are heading South due to the larger space and more opportunities for growth.

Another reason for this change is to adapt to the needs of consumers. Whereas traditionally people would do a big weekly shop people now tend to shop several times a week. In effect this means a customer wants the wide array of options that a supermarket can offer while still being able to shop at a convenient location.

This has also changed the size of the stores. Convenience stores used to be 5000 square feet and the larger stores 20,000 square feet. Increasingly companies are now creating stores based in this “No man’s land” that allows for both choice and convenience.

Of course this does beg the question- what about the existing stores? In simple terms the investment goes toward changing the environment and rebranding. They are also increasing the amount of concessions in store in order to increase choice and quality of brands.

The idea behind this investment is that it will increase foot fall and get people in the store. While Click and Collect and home delivery are useful services this does run the risk that people stick to their favourites and you do not get the added benefit of people looking around and picking up impulse purchases.

It is easy to forget that 70% of convenience stores are still owned by independent retailers. However as companies look for space and convenient locations inevitably this will mean that fewer and fewer of these stores will be independently owned. While this means a reduction in choice it does also mean a reduction in prices.

The strange thing is the convenience stores work for both people who want to cook and those that don’t- research shows people like buying fresh produce in store while the same research also indicates people do not tend to order ready meals online.

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