Nobody cares about Tesco in Betty's Tea Rooms. Scones are buttered and Yorkshire tea sipped without a second thought of the UK's largest grocer. Down the road at Ramus Seafood Emporium, well-dressed customers have fish on their mind, not Sir Terry Leahy or the Competition Commission. And the story is much the same at Andy Annat's Gourmet Stores.

This is Harrogate and it's here, amid a paradoxical mixture of controversy and profound indifference, that Tesco is facing its final frontier. Harrogate's sprawling HG postcode shares a rare distinction with Orkney (KW), Shetland (ZE), Outer Hebrides and mid-Wales (LD) in that it's one of the few remaining postcodes in the UK without a major Tesco supermarket. But all that could be about to change.

The retailer is expected to submit an application for a 60,000 sq ft supermarket on Electric Avenue at the former New Park gasworks site in the north of the town. Though it has not specified when, and approval could take years to secure, Tesco's statement of intent has already got tongues wagging about whether Harrogate really needs another supermarket and how people will react.

Harrogate is a logical target for Tesco. Though the retailer has an Express, its nearest supermarket is 12 miles away in Leeds. Yet the town has a regiment of upmarket independents and mass market players such as Sainsbury's, Asda, Waitrose, Marks & Spencer and Morrisons.

Opinions are divided over the impact Tesco would have. Despite vocal opposition from some quarters, others appear to support the proposed scheme. Tesco held a three-day public exhibition of the plans this January and says that as well as asking about the 400 new jobs to be created and the anticipated range of goods, "local residents were extremely happy to see that our plans would open up the river corridor through the site, restoring this feature for public enjoyment". It claims that 78% were in favour of its plans.

Although many of the multiples are already represented, there is scope for up to 54,000 sq ft of additional food retailing in the Harrogate and Knaresborough areas over the next five years, according to research carried out for Harrogate Borough Council in 2004 by property consultancy CB Richard Ellis, though Tesco's proposed store would gobble this provision up in one go.

The north of the town, where retail provision hasn't kept pace with housing development, and where Tesco intends to build its store, was identified by the research as an ideal potential location. As well as serving residents in the north it would potentially reduce cross-town traffic, says the research.

"This part of Harrogate has been crying out for a supermarket for years, something that Harrogate Council has identified following a council-commissioned study into local supermarket provision," says a Tesco spokesman. "Residents in this part of town are fed up with having to travel to the south or into the centre of Harrogate for their weekly food shop."

This position is supported by Brian Dunsby, chief executive of the town's Chamber of Trade. "Harrogate is badly served for food retailing on the north side, so there's massive traffic movement from the north to the south and that traffic volume has reached crisis proportions," he says. "We'd like to see Tesco use its car park for a park-and-ride scheme, as it does in York, and that would protect the interests of small retailers."

Others are less convinced by Tesco's proposition. The retailer claims the scheme will regenerate the area and says it has been in discussions about developing the site ever since it completed the acquisition in April 2006. But local MP Phil Willis believes its main motive is to assuage concerns over its land banks. The retailer is thought to have paid nearly £3m for the bulk of the site in 2003 and the land has since remained undeveloped.

Cynics also question suggestions that traffic congestion will be eased. "Tesco can hardly claim that putting a huge supermarket in the middle of an estate where we already have traffic queuing for more than half a mile isn't going to have an effect," argues David Burns, one of the leaders of the No to Tesco in Harrogate campaign group.

Disputes over traffic will not be the only obstacle Tesco faces. There is also the question of how suited its retail offer is to the local populace, says Paul Langston, CACI's associate director for location strategy.

"Harrogate is more upmarket than the average UK town, and its population is correspondingly more upmarket than the typical Tesco shopper," he says. "Tesco would have to steal a lot of trade from the others. It doesn't seem like an obvious gap for Tesco and it will find it hard going."

Harrogate's well-heeled shoppers may think Tesco is beneath them, he adds. "My theory - and it's just anecdotal - is that there is a more natural movement of shoppers from independents to Waitrose, and vice versa, than to and from the other supermarkets. Customers who use Harrogate's independent grocers may think that Tesco is a trade down. The idea it will destroy local independents is overplayed."

Perhaps the biggest challenge Tesco faces comes not from the locals, but from multiple rivals and discounters, many of which already have a foothold in the town.

Asda, for instance, has applied for permission to create a mezzanine floor of 40,000 sq ft at its 20-year-old store on Bower Road. Meanwhile, Gregory Group has submitted an application to build a 13,000 sq ft store for a discounter on the car park of the nearby Focus DIY sore at Oak Beck Road, and Lidl is opening up in Knaresborough.

If Asda and Gregory Group are successful, and sources suggest they may well be, they will eat up 53,000 sq ft of the 54,000 sq ft identified by CB Richard Ellis, not leaving Tesco an awful lot of room for manoeuvre. With work on Harrogate's local development framework still in progress, planning applications like these could force the council's hand. Many observers think it will favour town centre stores such as Asda's, whereas out-of-town stores will need to prove their case. Concerns over traffic congestion are unlikely to help Tesco's cause.

Tesco remains confident. "From the moment it was acquired, Tesco has been working consistently to develop a new store on this derelict site," says a spokesman. "The breadth of products we offer, from our luxury Finest range to our Tesco Value range, makes us the choice for all kinds of shoppers."

But, its entry into Harrogate is by no means a foregone conclusion. And it may be its multiple rivals, not the locals, that spoil its party.nthe catchment

Harrogate is posh. More than a third of the population are "wealthy achievers". Indeed, according to CACI, the town easily beats the Tesco customer profile for the share of wealthy achievers, prosperous urbanites and comfortably well off it attracts, with 44%, 26% and 8% more than the Tesco averages respectively. Conversely, Harrogate has less than half the average Tesco count of hard-pressed households, and just two thirds the average number of households with moderate incomes.