ANALYSIS: Supermarkets spy local attraction

Supermarkets have taken to purchasing convenience stores in a bid to increase their share of local 'top-up' buying, says Rachel Barnes.

Already dominant on the high street and in retail parks nationwide, the UK's major supermarket chains now have their sights set firmly on the corner shop market.

Tesco's pending £54m acquisition of 45 Adminstore convenience outlets in some of the wealthiest parts of London has been followed by a mooted bid by Sainsbury's for TM Group, which operates 1200 stores, including the Forbuoys and Martins chains.

Add to the mix Tesco's £377m acquisition of T&S's 800-plus stores in October 2002, and Co-op's purchase of Alldays from receivership the same year, and it's clear that the convenience - or 'top-up' - sector represents the latest strategy for supermarkets to extend their reach.

Planning problems

One reason why supermarkets have been eyeing up this market is the difficulty in buying ground for superstores. According to Verdict Research senior retail analyst Steve Gotham, planning restrictions are making it difficult to open stores.

Coupled with a change in lifestyle - consumers demanding convenient products to fit in with hectic timetables - it means the buoyant top-up stores have become prime targets.

Smaller players argue that a fragmented convenience sector means supermarkets tapping into the market could use their massive buying power to disadvantage rivals.

But in 2000, the Competition Commission decided that top-up shopping was entirely separate to consumers' weekly shop, and so the sectors were split into supermarkets and convenience stores.

This paved the way for recent takeovers, which have given Tesco a 6% share of that sector, despite already having more than 25% of the overall grocery market.

"Tesco has been aided in the pursuit of convenience stores by the competition authority's lenient approach," says Gotham. "It was extremely fortuitous when it acquired T&S. If that had happened after the Safeway takeover there would have been an investigation." He believes that the law should be changed to consider both sectors as a single larger market.

Not surprisingly, Tesco is happy with the law and is confident that its Adminstore purchase will go through without a problem. The market, it says, is big enough for everyone.

"There are 54,000 individual businesses in the market and it's a £21bn sector," says Tesco spokesman Jonathan Church. "If other companies continue to offer good prices and convenience, there will still be an awful lot of choice out there for consumers."

Integrating acquisitions

Tesco insists its acquisitions are not signs of a general trend for supermarkets to take control of the entire convenience market. Sainsbury's refuses to comment at all.

Convenience store takeovers have so far followed a pattern of leaving existing management and staff in place. But this places a question mark over how easily convenience chains operating under their own guidelines and culture can fall into line with a new set of values.

Tesco claims there is "no risk to the brand at all". It says that the proof lies in the "good job" that Adminstore's staff have done. "They will all be retrained so that they can talk about our different brands and they'll be brought into the Tesco model," says Church.

All the stores, which include the Europa, Harts and Cullens brands, will be renamed Tesco Express, offering fresh foods and convenience meals at, most importantly, lower prices. But how quickly and effectively this can be done will affect whether Tesco's presence is strengthened or its brand becomes diluted and compromised.

Judging by the speed of Tesco's conversion of T&S's One Stops since the acquisition 16 months ago (110 so far out of 450 selected for rebranding), Gotham believes a quick changeover is difficult. In his opinion, this is where the retailer's operational skills are put to the test. "Tesco must be able to offer consumers an experience of its brand, but it takes time to get it right."

TOP-UP TAKEOVERS

Supermarket brand Convenience store target No of stores

Musgrave and Londis circa 2000

Big Food Group

Sainsbury's TM Group - Forbuoys, Martins and McColls 1200

Tesco Adminstore - Europa, Harts and Cullens 45

Discussion

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus
Brand Republic Jobs

subscribe now

Latest

Waitrose boosts content strategy with 'Weekend Kitchen with Waitrose' C4 tie-up
Hottest virals: Cute puppies star in Pedigree ad, plus Idris Elba and Fruyo
Amnesty International burns candles to illuminate new hope
Toyota achieves the impossible by calming angry Roman drivers
Tom of Finland's 'homoerotic' drawings made into stamps
YouTube reveals user habits to appeal to 'older' marketers
Ex-M&S marketing chief Steven Sharp consulting at WPP
Wolff Olins reveals new CEO after Apple poaches Karl Heiselman
Glasgow offers £30,000 prize to best digital idea for 2014 Commonwealth Games
Google's revenues surge but shares drop as it grapples with transition to mobile
Facebook beats Twitter to most 'marketing friendly' social media site crown, says DMA
Fableists believe children like Finn should be outdoors enjoying life
Homebase, Baileys and Camelot join the line-up at Media360
MasterCard renews Rugby World Cup sponsorship to push cashless message
Lynx unleashes £9m 'Peace invasion' campaign
Social Brands 100 Youth: Pizza Hut most social youth brand in UK
Cheryl Cole is wild and arresting in new L'Oreal work
Morrisons told not to show alcohol ads during YouTube nursery rhymes
O2 head of brand Shadi Halliwell departs after 23 years at company in restructure
Tesco hit by further sales decline as it turns to digital Clubcard and social network
Branding guru Wally Olins dies aged 83
Duracell short film captures epic Transatlantic voyage
Ash runs Tinder experiment to show smokers are less desirable to opposite sex
British Airways teams up with Gerry Cottle Jnr for summer of rooftop film screenings
Arklu says 'girls can be superheroes too' with doll design competition
Coke enters squash market with Oasis Mighty Drops
Virgin Galactic signs up Land Rover as space flight sponsor
Motorola marketer Andrew Morley departs as Google gears up for sale to Lenovo
US Airways apologises after tweeting obscene image at a customer
Mumsnet admits users' emails and passwords accessed via Heartbleed bug