Changing Store Formats

In addition to trends in the actual number of stores and total floorspace across GB, it is also important to understand the various changes to store formats over the last ten or so years. For a long time in the grocery market, the blueprint was to build large out-of-town supermarkets as increasing mobility meant these types of stores would be most preferable. However, due to changes in the structure of the population, new planning policy regulations and shifting consumer demand, retailers have had to adapt the range of stores in their network portfolios.

Consequently, Figure 5.16 exemplifies the different types of stores for selected retailers that exist in the grocery market classified by their size (sq ft). The classification is that used by IGD and states the following; convenience (less than 3,000 sq ft), small supermarkets (3,000 to 9,999 sq ft), large supermarkets (10,000 to 24,999 sq ft), superstores (25,000 to 59,000) and hypermarkets (over 60,000 sq ft).

First of all, Figure 5.16(a) indicates that Tesco has stores which fit into each of the different formats. Burt et al. (2010) discuss the range of Tesco stores and their history in more detail.

Nevertheless, the main formats in order of size include Tesco Express, Tesco Metro, Tesco, Tesco Extra and Tesco Homeplus. However, it has not always been like this for Britain’s number one retailer. For example, in 2002, Tesco’s store networks were primarily between 3,000 sq ft and 59,999 sq ft in size. Since then, Tesco have invested heavily in the convenience store market through its various acquisitions and also built a number of large hypermarkets.

This polarisation has meant the medium sized stores are being squeezed out of the market to an extent. The growth of the larger hypermarkets is interesting, as it suggests that despite strict planning regulations, Tesco have still been able to build their large out-of-town stores. A similar pattern is also seen with Asda in Figure 5.16(b), as it too has continued to increase the number of large 60,000 sq ft stores over time. However, as the total number of stores has not increased as rapidly, it would suggest that Asda have undertaken a considerable store extension programme. The difference with Asda is that it has resisted the option to move into the convenience sector, with all of its stores being greater than 10,000 sq ft. The purchase of Netto (not included in Asda data), however, suggests that Asda is aware that it needs to deliver smaller supermarkets to meet the needs of local communities, to reach more customers in markets that are currently underserved by Asda.

(a) Tesco (b) Asda

(c) Sainsbury’s (d) Morrisons

(e) Discounters (f) Waitrose

Figure 5.16. Store format for selected retailers between 2002 and 2012 in GB Sources: (GMAP Ltd 2002 to 2012)

Similarly to Tesco, Sainsbury’s also has an extremely varied network of stores. These include Sainsbury’s Local, Sainsbury’s Central and Sainsbury’s supermarkets. Unlike Tesco (Tesco Extra) and Asda (Asda Wal-Mart Supercentre), Sainsbury's does not employ a separate brand for its hypermarkets, having phased out the 'Savacentre' fascia several years ago. Since 2002, Figure 5.16(c) shows how the retailer has increased the number of smaller convenience stores.

Furthermore, in a contradictory strategy to Asda and Tesco, Sainsbury’s appear to have concentrated far less on the construction of large hypermarkets. Whilst it has continued to build them, it appears to have been at a much slower rate than supermarkets and superstores.

Morrisons has also traditionally supplied stores that are greater than 10,000 sq ft, exemplified by Figure 5.16(d). However, in 2011, Morrisons announced it would open its first convenience store in Ilkley, Yorkshire. The new format (branded M-local), was the first of a three store trial to evaluate and refine Morrisons convenience offer. As many of these stores are still in a trial phase, the challenge for Morrisons is to maintain its core values and appeal as it continues to expand. Consequently, to ensure it differentiates itself from its rivals, M-local stores are designed to have a greater emphasis on fresh food, skilled craftsmen and women, increased affordability and guaranteed freshness (Morrisons, 2012). Since launching its first M-local format, Morrisons has opened five stores so far, and promised to open 20 by the end of 2012 and 70 by the start of 2014 (Morrisons) – there is also speculation that Morrisons has held exploratory talks with Costcutter, as it seeks to gain a serious foothold in the convenience market.

Since arriving in GB in the early 1990s, the discounters have been much more consistent with their store formats. As mentioned, the standard model for a discount store is one with low operational costs built on relatively cheap land (Colla, 2003). Based on the data in Figure 5.16(e), it would appear that this is a format between 3,000 and 10,000 sq ft in size. Since 2002, the discounters have been committed to rolling this format out as it is clearly one which works for them. In comparison, Waitrose have attempted to be more varied with their stores. Initially, in 2002, much like the discounters, Waitrose was associated with the ‘traditional’ supermarket format. However, today we see a range of different store types. For instance, since purchasing a number of stores from Somerfield and Safeway it now has a selection of stores under 10,000 sq ft. Furthermore, after announcing its venture into the convenience sector in July 2008, a large-scale roll-out of the ‘Little Waitrose’ concept has been planned, opening up to 300 stores in the next five to ten years. Trading from 2,500 to 4,000 sq ft, the majority of sites are expected to be opened in London and are believed to be a direct challenge to the M&S's Simply Food format.

Whilst Figure 5.16 provides a clear understanding of the changes in retail format over the last ten years, it does not identify any geographic difference between them. This is important when

trying to understand the impact of the different formats on different parts of the country.

Consequently, Figure 5.17 demonstrates the percentage of stores that fit into each of the format categories by the Vickers and Rees (2007) LAD classification. It must be noted that only the stores associated with Tesco and Sainsbury’s were used as these retailers have the most diverse store portfolios. The percentages are also provided in an index where 100 is the average to standardise the data. This is because there are far more stores in the more urban areas compared to the rural classifications. This index was calculated as followed:

̅

(5.2) where, represents the index value for each store format (f) in each LAD class (I), is the percentage of stores by format (f) in each LAD class (I), and ̅ is the mean of for GB.

First of all, it would appear that the convenience stores (<3,000 sq ft) are dominant in

‘Multicultural inner London’, the ‘City of London’, ‘Central London’ and ‘Coastal resorts’.

London is clearly an area where there is a much greater demand for convenience retailing. This is arguably down to long working hours in the city and the high percentage of smaller households. Furthermore, the high rental costs for land in the capital could mean smaller shops are simply more affordable for retailers. In addition, the above average level of convenience stores in ‘coastal resorts’ suggests Sainsbury’s and Tesco are using their Local and Express formats respectively to target rural coastal villages. It is likely that both retailers would face strong opposition to large supermarkets in these types of areas.

In terms of the supermarket formats (3,000 to 10,000 sq ft and 10,000 to 25,000 sq ft), Figure 5.17 displays a pattern of increasing rurality with larger stores. For example, whilst many of the smaller supermarkets still remain prominent in the ‘city of London’, ‘central London’ and

‘multicultural inner-London’, areas defined as ‘rural extremes’ and the ‘M8 corridor’ also contain above average numbers. This becomes even more prominent for larger supermarkets as there are high levels of 10,000 to 25,000 sq ft supermarkets in the ‘commuter belt’, ‘aged coastal extremes’ and the ‘rural fringe’. This is consistent with the literature which argues that larger supermarkets are being located in out-of-town areas. This continues with the large superstores (25,000 to 60,000 sq ft) as they too appear to be located in areas termed ‘rural extremes’, ‘aged coastal extremes’ and the ‘M8 corridor’. It may be expected that this would follow explicitly for large hypermarkets. However, Figure 5.17 highlights a somewhat mixed spatial pattern. For instance, there are still high figures for the ‘M8 corridor’ and ‘outer London’. However, those areas that show the highest values are ‘regional centres’ and ‘typical

towns’. This is likely because the large 60,000+ sq ft stores still need a considerable population to ensure profits as simply locating in very rural areas is not enough for this format of store.

Figure 5.17. Tesco and Sainsbury’s store formats by LAD classification in GB, 2011 Source: Vickers and Rees (2007); GMAP Ltd. (2012)