Life is tough for an independent retailer. As well as contending with competition from the big four, retailers are also facing more red tape, soaring energy bills and a credit crunch.
But despite the economic climate, independents remain ambitious about their growth prospects. In The Grocer's annual ranking of the UK's Top 50 independents, 29 opened new stores last year and many claim to be hunting for more sites in 2008.
TJ Morris, the company behind Home Bargains, has 138 stores across northern England and the Midlands and plans to increase its portfolio to 500 stores in the next 10 years. Discount chain B&M Retail, which has 61 stores, is aiming for 100 stores in the next five years, while frozen ready meals retailer Cook is looking to add 10 new outlets to its 22-strong portfolio in the south east this year.
Frozen Value, the company behind Fulton Foods and Jack Fulton, has plans to expand outside its traditional heartland of northern and central England this year, while Parfetts Cash & Carry's Local 4 U c-store format is eyeing eight stores.
These are bold plans considering the widely held belief that it is now harder to secure new sites. Convenience chain Rust, which sold up to Midcounties Co-operative Society in September 2007, is one example. It claimed competition from Tesco, Sainsbury's and Marks & Spencer had made it difficult to secure stores. And in February 2006, Anglian Convenience Stores sold up to the East of England Co-operative Society because Tesco and other co-ops were paying prices for property it simply couldn't match.
For most independents, it is often the management's job to juggle new store opportunities with overseeing the day-to-day running of their stores. Or, if they're lucky, they may have one dedicated member of staff responsible for property.
It's not just the prices. The resources and budgets of the multiples dwarf these. Asda's has a 17-strong property team, while Sainsbury's has 13 people dedicated to finding supermarkets and a six others responsible for hunting down c-stores. Tesco and Morrisons won't say how big their property teams are, but Tesco's is understood to be considerably bigger than Asda's and Sainsbury's.
"The multiples have large property teams and employ full-time analysts to look for sites," says Paul Langston, associate director for location strategy at CACI. "They have set criteria and will carry out a detailed local analysis of the market, demographics, and competition."
Teams build a number of models as part of this analysis, either in-house or with a consultancy, to identify factors such as the turnover different stores will generate and the impact of a new competitor, he says. Members of the property team would also pound the pavements to sound out good sites, make contacts and build their knowledge of local areas.
Tesco's criteria for One Stop stores, for example, tick all the boxes on the wish list of an independent c-store chain - 3,000 sq ft stores with minimum existing sales of more than £10,000 per week, in prominent locations with a minimum population of 4,000 within half a mile.
The major retailers are also using their websites to let people know they're hungry for additional sites. One Stop, Tesco's convenience chain, and discounters Aldi and Lidl have dedicated pages on their websites asking people to contact them if they have a site to sell. They both ask for prominent sites in town, district, edge-of-centre or out-of-town locations with main road frontage and just under an acre of land.
Independents are catching on to this and copying them. Frozen food retailer Farmfoods has a dedicated page on its website asking for 5,000 sq ft to 7,000 sq ft stores with adjacent or nearby parking - typically roadside or in a small retail park. And Cook, in its latest newsletter, is rewarding its customers for their help in finding sites with £250 of vouchers and a chance to cut the ribbon for any successful tip-off when the new store opens.
The cannier independents have found that making contacts is the best way to keep the multiples at bay. "The best way to find sites is to get talking," says Nigel Mills, MD of Mills Group, which operates 75 c-stores and CTNs in the north of England, the Midlands and south Wales.
"It's competitive so independents have to be proactive and invest time in finding sites. We use property agents, we cold call businesses, we talk to property developers and we make contacts with people in the industry."
The decider is traffic, adds Mills. "Potential footfall is the most important factor when looking for sites. We count the number of houses around a potential store, check whether the site has good visibility and parking, and whether it is close to complementary businesses such as hairdressers and takeaways."
One advantage independents have is being able to move quicker, which can make a sale more attractive to a business that is keen to sell. The process of identifying a suitable site through to opening a store can take the multiples a number of years. They may be able to act quicker on c-store acquisitions, but they still face long analysis and regulatory hurdles caused by planning or competition issues.
"What differentiates us from larger organisations is our ability to transact quickly," says Simon Arora, MD of discount chain B&M Retail.
"We do not have bureaucratic approval processes, which means we can decide whether to buy a store within a week. We use an in-house store assessment process when evaluating prospective sites. This has been established over a number of years and we don't rely on external agencies. We find that would slow down our decision-making process without necessarily adding any value."
With the likes of Tesco, Sainsbury's and M&S making a bigger mark in convenience, independents need to be more flexible, says Tony Evans, retail director at property agent Christie & Co.
"Generally there are plenty of opportunities available in the marketplace - freehold and leasehold," he says.
"The majority of corporate and multiple operators continue to have strategies for acquisition and while this poses competition to independent operators, there are still excellent opportunities to be had if companies look slightly off the corporate radar."
Independents could also consider looking for smaller stores capable of producing strong sales, he adds, such as 1,250 sq ft stores that generate a similar weekly turnover to larger stores.
It may be tough but independents shouldn't panic, says Evans. "Independents need to research their chosen market and understand the factors that may be affecting the market and viability. They need to view plenty of businesses and prepare questions for owners so that they glean as much information as possible. Think with your head and not your heart."nCASE STUDY 1: cook
Cook has set a target of opening 10 stores this year, taking its portfolio beyond 30. Two have already opened and sites have been identified for another two.
And it's property manager Matthew Bourne's job to find them. Searches are dealt with in-house. Bourne visits areas and talks to agents so they get a better idea of what is required. The company looks for high-visibility shops with parking on roads heading into town centres. Betting shops and wine merchants are its biggest rivals as they are realising sites on the outskirts of town work better.CASE STUDY 2: houghton trading
"Stores offered to us by property agents have often been rejected by the multiples, who the agents have better relationships with than we do," says Houghton Trading MD Kishor Patel.
"But, because we know the local area, if we see a store we like we contact the owner and ask if he is interested in selling.
"Vendors always ask for higher prices than their stores are worth, but we will weigh up the store on its potential weekly turnover. I show them my business and how well my stores are trading and how well I look after my staff."