Planning applications for large supermarket floorspace is at its lowest level since 2008 according to a recent report by CBRE.
However, the number of new store proposals has continued to rise.
Supermarkets are getting smaller and local with convenience stores seeing more and more openings.
The average size of store proposal is falling due, in large part, to a sharp reduction in the number of hypermarkets coming into the development pipeline, according to global property consultants CBRE.
Chris Keen, Director at CBRE, comments:
“The grocery superstore space race has eased as the capital expenditure available for supermarket development is squeezed with investment increasingly diverted to both convenience stores and improving existing stores. Tesco and Sainsbury’s continue to increase their convenience store (c-store) market share but Morrisons and Waitrose have created c-store formats too whilst Co-op has moved away from supermarket development to concentrate on c-store formats.
“Asda is meanwhile trialing a new c-store format in petrol stations. Even Aldi opened their `first small town centre store earlier this year which is the start of a new c-store chain. As Independents/Symbols have a 70% market share still, the convenience store side remains a major opportunity for the big grocery chains which they will continue to mine. Tesco and Sainsbury’s are leading things, in part boosted by their multi-channel offer”.
CBRE says that Aldi and Lidl are continuing to gain market share, which is up from 2.1% in 1998 to 8.3% today, but this is due more to the increased opening programme than shoppers changing loyalties. Both brands have added 779 stores since 1998.
The discounters will likely continue to take business away from the big-5 by continuing their aggressive expansion programme, but this is unlikely to pose a significant threat to the main players as the expansion rate is too slow to do that.
Dilution of profit margins from investment in on-line retail activity and loss of trade to their own and others’ convenience stores will be a bigger problem for the big-5.