Shop floors shrink by 1million sq ft as desperate supermarket chains cut space for first time in a decade
The total floorspace owned by Britain’s supermarkets has shrunk by over a million square feet in the past year – the equivalent of 13 football pitches – the first reduction in more than a decade.
Analysts have examined the largest groups as far back as 2004, when Tesco was almost half its current size, but some observers believe the cut may be the first since the 1940s.
Supermarket retailers have been hit by what has been described as a ‘perfect storm’ in the past 12 months with the implementation of price cuts aimed at undermining rivals, the falling cost of some foods and the looming impact of the Government’s new national living wage.
Floorspace reduction: Tesco announced in January that it would close 43 stores
In addition, shoppers are making fewer trips to big stores, preferring to shop locally at convenience shops or ordering online.
The net reduction of floorspace – the result of closures or sale of sites – contrasts with the fastest rate of growth in 2009 when the biggest eight store groups grew by almost ten million square feet.
Tesco announced in January that it would close 43 stores and Morrisons revealed earlier this month that it would split off its 170-store M Local convenience shop chain and close 11 big stores.
In the past 12 months the Co-op has spun off its multi-million square foot pharmacy business and it also plans to close 350,000 square feet of supermarket space every year.
Experts at broker Bernstein said in a report that the space contraction of around 1 per cent among the biggest eight groups – which include Asda, Sainsbury’s, Lidl, Aldi and Waitrose – was a ‘remarkable’ turn of events.
Analyst Bruno Monteyne said even excluding the Co-op, which has been forced into a major restructuring, space growth is at its slowest for years.
‘This is a major change in trend,’ he said. ‘For the previous nine years space grew on average by 4.9 per cent and volumes grew by 0.5 per cent. What a mismatch in supply and demand.’
He said the move towards a reversal of the previous trend meant supermarkets could begin to become much more efficient.
Closures: Morrisons said that it would split off its 170-store M Local and close 11 big stores
At the same time German discounters Aldi and Lidl are each continuing to add an estimated 500,000 square feet of floorspace every year.
The pressure continued to mount on British-based supermarket groups last week when Lidl signalled a pay rise for staff ahead of demands made by Chancellor George Osborne for a minimum wage of £7.20 an hour from next April.
Lidl said that from October it would be the first food retailer to implement ethical pay levels as recommended by the Living Wage Foundation. Its employees will earn a minimum of £8.20 an hour in England, Scotland and Wales and £9.35 an hour in London. Currently, Lidl pays its staff a minimum of £7.30 an hour, with those in London getting £8.03.
Supermarket analyst David Gray, at Planet Retail, said: ‘It’s great news for Lidl’s workforce and is partly driven by the fact they’re doing well and they have more cash available. But they also operate a more efficient model – as you might see from the pallets on the shop floor – and each store has fewer staff.’
The battle for customers has taken its toll on supermarket share prices. On Friday, Sainsbury’s shares hit 218p. The last time it was as low was in 2003.
Meanwhile, analysts predicted a price-cutting campaign as chains begin to focus on attracting shoppers in the run-up to Christmas.
Most watched Money videos
- German car giant BMW has released the X2 and it has gone electric!
- 'Now even better': Nissan Qashqai gets a facelift for 2024 version
- Iconic Dodge Charger goes electric as company unveils its Daytona
- Skoda reveals Skoda Epiq as part of an all-electric car portfolio
- Mini unveil an electrified version of their popular Countryman
- How to invest to beat tax raids and make more of your money
- MG unveils new MG3 - Britain's cheapest full-hybrid car
- BMW's Vision Neue Klasse X unveils its sports activity vehicle future
- BMW meets Swarovski and releases BMW i7 Crystal Headlights Iconic Glow
- MailOnline asks Lexie Limitless 5 quick fire EV road trip questions
- Paul McCartney's psychedelic Wings 1972 double-decker tour bus
- The new Volkswagen Passat - a long range PHEV that's only available as an estate
- Petrol surpasses 150p a litre - cost of filling up is now...
- Homes for sale at five-year high, says Zoopla: Will house...
- Royal Mail steps up defence in bid battle with 'Czech...
- AB Foods shares soar as Primark owner eyes 'significant...
- UK limbers up for rate cut... and not before time, says...
- Hornby sales slump as model train maker is hit by Red Sea...
- Thames Water customers face huge increase in bills
- Are you a backseat driver? The 20 telltale signs you're a...
- Our friends wriggle out of paying their fair share on...
- Struggling Asda promises to cut £3.8bn debt pile
- BUSINESS LIVE: UK borrowing soars; JD Sports buys...
- Footsie hits a record as Investors eye lower interest...
- Takeovers leave UK stock market facing 'death by a...
- Convicted rate-rigger Tom Hayes in fresh appeal as he...
- Electric Range Rover revealed during Arctic Circle...
- CVC Capital Partners' float to hand private equity tycoon...
- MARKET REPORT: Retailers lead the way on FTSE's historic day
- UK grocery price inflation falls for 14th consecutive month