Tesco revamp looks to stop giant stores becoming a white elephant – The Guardian

Bigger is no longer better – at least for supermarkets. After more than two decades of opening ever larger stores, shopping habits are changing fast and supermarket bosses are having to hastily rethink their business model.
They are chopping back the size of their largest stores as shoppers start to buy less, but more frequently and locally, and as traditional retailers face increasing competition from the internet.
Next week shoppers will get an idea of what might be in store for them when Tesco reopens its Watford hypermarket, with a whole array of new ideas designed to pull in families for more than just the weekly shop.
The Watford Extra shop, initially opened in 1988, will feature the first Giraffe restaurant outlet inside a Tesco – the grocer bought the chain in March for £49m – along with a nail salon and a “community space” for local groups to use. There will also be a branch of Harris & Hoole, the coffee shop chain backed by the grocer and a Euphorium artisan bakery.
At the vast Stockton-on-Tees branch Tesco is installing a soft-play zone and a gym which will offer pilates classes. In Coventry Tesco is testing out a new carvery restaurant called Decks that will serve up roast dinners for £5.50.
Sports Direct outlets could also soon be springing up inside Tesco stores: the grocer is in talks to rent space to the sportswear chain. It has already the sliced nearly 40% off one hypermarket in the Czech Republic by renting the space to Sports Direct and C&A. The move increased the number of visitors by 25% and trading profits rose by £0.5m.
Tesco’s UK boss Chris Bush told The Grocer magazine last week: “In the past, large hypermarkets were popular because they offered a massive range of products and people liked being able to buy everything under one roof – it made life easier. The internet has changed all that – people don’t even need to leave their homes to go shopping and more people are using convenience stores for regular top-up shops. So we need to give them good reasons to come to our larger stores.”
His view of superstores now is not one where shoppers wheel their trolleys down aisles filled entirely with giant bottles of Coke or electrical goods but as destinations where “customers can have a meal or coffee with their friends and family, browse for clothes and get their hair done. They can go to yoga classes or attend cookery classes in a space available for the local community to use.”
Tesco called an end to the supermarket “space race” a year ago, saying it was ditching its long-term plan of opening ever larger stores across the country. It is also hacking back the size of up to 50 of its biggest UK supermarkets. A further 20 stores in central Europe, some of which are as big as 14,000 sq metres (150,000 sq ft), also face a prune.
Philip Clarke, Tesco’s chief executive says that the company is unlikely to open any more stores over 7,500 sq metres in future, and all its existing stores over that size are likely to change markedly. Industry insiders have said it was probably a mistake for any supermarket to open stores over 5,500-6,500 sq metres – suggesting the pruning job could be bigger than Clarke is so far ready to admit.
Tesco is the first to admit that it needs to take drastic action to slim down its massive shops. But there are at least 137 other UK supermarkets over 5,500 sq metres, on top of the 238 Tesco owns in the UK, suggesting others may have to follow suit in future.
“This could be just the beginning,” says Dave McCarthy, retail analyst at Investec. “I think there will be a lot more over time.”
The large store is not just a UK phenomenon. Retailers such as Walmart in the US and Carrefour in Europe are all trying to work out how to prevent their giant stores becoming white elephants.
Once the bright shiny face of the future, shoppers have fallen out of love with huge supermarkets. With the dawn of the internet, it’s more convenient, and often cheaper, to buy large non-food items such as TVs and sofas from home.
Rising petrol prices mean that driving to out of town stores is more expensive and those trying to watch their budget are choosing to shop more frequently, and more locally, rather than risk the temptations on offer at a hypermarket. Meanwhile, buying groceries online is increasingly attractive, particularly now it’s possible to pick them up at a convenient time via click-and-collect services.
While there is mounting concern about the decline of the UK’s town centres, out-of-town stores have been witnessing a much bigger drop in visitor numbers. In the early months of this year, according to the British Retail Consortium/Springboard footfall monitor, the number of out-of-town shoppers fell 4.3%, compared to a 2.9% drop on the high street.
With fewer visitors, large stores can seem dreary and cavernous. As Tesco’s chief executive Phil Clarke told analysts: “The worst thing is going into a store which is short on customers and big on space.”
What’s more, huge stores are just no longer cost effective. Tesco and its rivals earn little profit from selling electronics, CDs or DVDs, while the space needed to display them needs heating, lighting and staff.
Asda boss Andy Clarke has said he wants to work with well-known local independent outlets, such as butchers and bakers, to create more life and colour in stores. The US-owned chain already has branches of McDonald’s and Disney concessions in some stores and plans to do more such ventures.
Asda has also tried letting community groups use spare space for dance lessons and scout groups and even hosted a driving test centre and provided rooms for midwives and police officers.
Clive Black, an analyst at Shore Capital, says: “It is premature to say that hypermarkets are dead but they are having to evolve to remain relevant. In five years time they will look very different.”


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