A poll of members of The Grocer Top 50 found 64% were worried that they could not compete head-on with a Tesco Express or Sainsbury’s Local. A whopping 91% said they would suffer a fall in sales if one opened nearby - most said the fall would be greater than 10% and many suggested up to 30%.
Although two-thirds thought their pricing and ranging were as good or better than a Tesco Express or a Sainsbury’s Local, the real concern was the strength of the Tesco and Sainsbury brands. “We can
compete in every way but marketing and brand awareness,” said one retailer.
Others were concerned at the multiples’ large marketing budgets and their loyalty schemes. Only this week, Spar announced it was investing £1.8m to advertise on TV and radio (see below).
Spar UK MD Jerry Marwood said: “It’s not inevitable that we can’t compete with the new enemy. We can survive and prosper, but we have to do a better job. Only the poor stores will close.”
The results of our poll came as the Office of Fair Trading effectively gave the green light to further deals in the sector by defending its decision to clear Tesco’s Adminstore acquisition.
In an eight-page report on the deal, the OFT again insisted that one-stop supermarket shopping and top-up convenience shopping were distinct markets.
And the regulator said that arguments to the contrary just didn’t wash. It claimed evidence supporting a single market definition was limited and not “sufficiently persuasive” to make it change current thinking. And in a further blow to those fighting moves by the big retailers into convenience, the OFT also said that even if it had viewed grocery shopping as one market, it would still have cleared the Adminstore deal.
Meanwhile, the Federation of Wholesale Distributors has written to the Competition Appeals Tribunal to demand the OFT changes its criteria for reviews. It argues the £70m turnover threshold is flawed.
Adminstore’s accounts showed a turnover of £72.7m for its portfolio, but Tesco bought only 45 stores to fall under the threshold. The Competition Appeals Tribunal will accept further complaints regarding Adminstore until April 16.
>>p42 Any future for independents?