Last week saw the latest introduction into the food convenience market, as supermarket chain Haldanes took the majority of the ex-Netto stores sold off by Asda.
Under a new branding as UGO, the 20 acquired stores will attempt to compete with the smaller branches of the larger supermarkets along with existing convenience outlets.
Owner of the Haldanes Retail Group, Arthur Harris, told Click Liverpool that UGO stores will have “old fashioned ideas and ethics reconstructed where necessary to encompass a modern trading format”.
The stores, which are concentrated around the north-west of England, will focus on groceries and an extended health & beauty offer but standing out in a crowded market will be a tough ask.
Retail analyst Jonathan Banks believes that competition from the four largest supermarkets (Tesco, Sainsbury’s, Asda, Morrisons) will be relentless in the convenience market in 2011 and due to their stronger buying and logistics structures UGO starts at a disadvantage.
Banks said: “In the UK the most important store choice differentiator is range - i.e. the bigger, the better. To compete with the top four they have to quickly establish their credentials for having what their customers want, listed (and available!).
“If you lose that battle then that leaves you fighting for the top-up shopping trips that take place in between the big shop visits to the larger stores, and of course that is a massive market and profitable when you get it right.”
The Co-operative recently set out its stall to increase its market share in smaller grocery trips, with an advertising campaign advising consumers to avoid the lengthy weekly shop and spend less time in the supermarket.
Morrisons took 16 of the Netto stores which Asda was forced to sell as part of a Office of Fair Trading judgement, but Banks is sceptical that even these established grocers can make a success of convenience retailing.
“Just because there’s a gap in the market - it doesn’t necessarily mean that there’s a market in the gap,” Banks commented.
“So is this something Morrisons could make a go of? I’m not sure - it’s away from their core business offering and history is littered with the demise of business plans that were a stretch too far for a brand. These concerns apply even more to Asda and Netto.”
There are many challenges ahead for retailers looking to expand into smaller grocery stores, and 2011 is set to see a fierce battle of convenience between the supermarkets.