The superstore that we know and love/hate/couldn‘t-care-less-about-but-use-anyway (delete as applicable) has its foundations in the boot space made available in the tens of millions of cars on the road in our great car society. That has provided for decades the store-to-house logistic channel that goes from checkout via free car park to the home – and all at the expense of the consumer.
This is a model that has legs, let alone wheels, and it‘s still growing, with the big four still opening new stores despite the slowing in their rollout plans. The superstore/hypermarket has been for some time the dominant format in a market in which just nine businesses own more than 95 per cent of the market, according to Kantar. The trouble is that boot space is becoming and will become less relevant as time goes on. If we peer a long way down the high street into the future maybe we can just begin to see a market dominated by very different retail formats.
The grocery half of retail has proven remarkably resistant to diversion of business to newer channels. Food sales online are still, in percentage terms, in low single figures, whereas product sales generally are in double digits and some subsectors such as Music, Video and Books are in the territory where online is becoming more the norm than property-based sales.
Online sales have, to date, largely been fulfilled from within existing superstores, but there‘s a groundswell of grumbling about aisles clogged by internet order pickers in-store and we have a new format in, well, out of, town, that suits the non-car-boot fulfilment perfectly. Superstores have to be close enough to consumers for them to be willing to spend the time needed to drive to them, but fulfilment centres only need to be close enough to consumers for it to be economically viable to deliver to them by refrigerated van.
So the excitingly-named “Dark Store” can be big, as big as is needed by its catchment area, which can be very very big. Ocado have been proving this for a while. Dark stores can easily replace multiple superstores. A replacement rate above one-to-ten looks easily achievable. There are no more than about 5,000 superstore-class outlets in the UK, so 500 dark stores should replace them nicely and Tesco, Sainsbury‘s et al are in the process of building their replacements. It‘s a commonplace that a national retailer can now cover the country with 200 stores or less, so that all sounds quite do-able.
The food market isn‘t growing much beyond inflationary expansion. The grocers are just fighting for market share. They could, of course, try to grab the non-food half of retail in one go, but that would only give them twice the turnover that they have at the moment, so the number of superstores would still fall even if they achieved it.
But the rest of the action is in smaller format stores run by the hard discounters, the convenience stores being opened by some of the bigger players and surprisingly, by independents, according to research for bira by the LDC. Between the dark stores and the convenience formats lie the superstores and their future is not so bright.
Then there are the hypermarket-class outlets: Tesco may have fewer than 500 superstores, but they have about half as many Extras as that. They would make ideal dark stores. I wonder when we see the lights begin to out there in those.
I can hear the old codger now, as he points with his walking stick down the high street to a distant and empty field at the edge of town: “I remember, when I were a lad, that were all supermarkets.”