Emerging consumer trends, heightened competition, and stricter planning rules for larger stores have all challenged the hypermarket’s leading position in international retail.
This is the argument made by a new report by global retail research company Datamonitor, which goes on to advise hypermarket retailers to increase innovation and downsize stores to combat the rise of online.
Hypermarkets have dominated the sector internationally over the last couple of decades, whilst the major supermarkets in the UK increased their non-food offering and became the biggest retailers in the market.
Non-food sales are increasing drifting online as giant e-tailers like Amazon can undercut hypermarkets on price, product range and convenience, and Datamonitor argues that the bricks and mortar giants must now adapt to survive.
Natalia Grabov, analyst at Datamonitor Retail, said: “One of the reasons for the popularity of hypermarkets in the past has been the ability to offer almost everything under one roof at competitive prices.
“Consumers’ search for value during the recession has resulted in discounters gaining a high level of loyalty, particularly in the markets most affected by the downturn.
“However, online retailers pose one of the biggest threats in the long term as they’re able to undercut hypermarket store prices.”
In the UK, supermarkets have targeted the convenience sector to make up for limited room for larger stores and Tesco’s flat trading shows the difficulties the larger multiples are having.
Tesco only sells online in three national markets and so this is a clear hole in its offering and Grabov says that localised service will become more important as time goes on.
“In the past hypermarkets have been able to rely on loyal customers, but now they will need to innovate in order to protect margins and ensure they can continue to expand,” Grabov added.
“Online will become increasingly important, and hypermarkets should look to align it more closely with store operations.
“For example shoppers are increasingly able to order online, have their order hand-picked in a nearby store, and then delivered to their address, and in some regions