ANALYSIS: Will hypermarkets take root?

UK supermarket groups seem ready to revive hypermarkets, but are British consumers ready to take advantage of them? Julian Lee reports

UK supermarket groups seem ready to revive hypermarkets, but are British

consumers ready to take advantage of them? Julian Lee reports



It has taken the UK’s supermarket groups nearly two decades to come

round to the idea that hypermarkets are a good thing for business.



Last week, Marketing revealed that Tesco is planning to convert up to 50

of its larger, older stores into Tesco Plus hypermarkets and is planning

its largest-ever site.



If Tesco is taking it seriously then the race for the format of the next

millennium has started in earnest. But is it just the case of the hype

being put back into hypermarkets?



Were you to believe the pundits 20 years ago, our every shopping need

would be satisfied by these mammoth out-of-town stores where you could

buy anything from frozen peas and paint to racing bikes.



In 1971, French giant Carrefour spotted a gap in the UK market and

opened the first of five massive stores. Sainsbury’s and Bhs set up the

joint-venture hypermarket Savacentre in 1976. Other chains were quick to

follow, including Asda.



The country seemed poised for hypermarket mania. So what happened?



Carolyn Simons, a director of retail consulting firm Management

Horizons, says that more than anything else poor merchandising let the

retailers down.



‘People weren’t interested in buying paint or those sort of things when

they were buying their food. On top of all that, the core offer of food

was often pretty awful.’



Hypermarkets became a noose around Asda’s neck. It was so wrapped up in

selling a myriad of peripheral items it lost the focus on its food

offer.



Savacentre found it difficult to get the right sites as local

authorities became more concerned about protecting town-centre shopping.



The final nail in the coffin came in the free-spending 80s as

supermarkets sharpened their food retailing skills and were easily

distracted by the quick gains to be made from selling just food from

gleaming new superstores.



Hypermarkets, it seems, could wait. That is, until the early 90s and

beyond when quite a different picture emerges. In November 1992 Archie

Norman, Asda’s chief executive, warned that the the UK supermarket

industry was nearing saturation point.



And, over the past few years, the hypermarket has once again come back

into fashion in the UK as the consumer goes in search of a one-stop

shop.



‘There’s no doubt that is what they want. If you look at the trends

we’ve seen then one-stop shopping is growing,’ says Asda’s Phil Reed.



In recognition of this the company has started rebadging 11 of its

larger stores as Asda Hypermarkets.



From that point on, the hypermarket began its rise out of the ashes of

the recession.



Robert Clark, of retail research group Corporate Intelligence, explains:

‘It’s because of the relative maturity of the supermarket scene. They

are all looking at different ways of driving growth,’ he says. ‘One way

of doing that is to trade better from existing stores - many of which

are older now.’



Faced with a portfolio of superstores that have lost their shine and a

stricter planning regime, retailers are having to make do with what

they’ve got.



And if that means remodelling stores and filling up the extra space with

such margin-rich products such as TVs, sound systems, videos and clothes

then so be it.



As one senior retailer put it: ‘Food margins have been squeezed as far

as they can go. We cannot afford to lower the prices so we are looking

to non-food for the growth.’



Other factors point to a renaissance of the hypermarket.



Supermarkets are now regarded as centres of excellence when it comes to

selling food. The UK consumer now expects so much more from its

supermarket.



Financial services, OTC drugs, vitamins, books, videos, music, clothes.

There is seemingly no end to the list of products that the supermarket

of a decade ago would not have touched.



No longer does a company need vast acres of storage space. Just-in-time

deliveries and modern technology has released more space to sell from.

Space that can be devoted to selling high-margin items such as greeting

cards and chocolate stalls.



Carolyn Simons warns them to be as credible as possible in the products

they sell, which she says they are managing to do.



‘I think they are more in tune with the needs of the housewife than they

once were. The shopper now recognises that supermarkets can do things

other than food well. The retailers will recognise that cycle of

excellence,’ she says.



Tesco will do well to heed mistakes made in the past by its competitors

or hypermarkets will remain a phenomenon of the 70s rather than a

reality of the 90s.



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