British Supermarkets Eye Convenience Stores as Growth Areas

Asda, J Sainsbury, Wm Morrison and Tesco all have plans to expand or launch smaller locations.

July 07, 2011

LONDON - During the next few years, the big four of U.K. supermarket chains will delve more deeply into the convenience store market, the Financial Times reports. Asda, J Sainsbury, Wm Morrison and Tesco will open or expand locations between now and 2014. Waitrose also has recently announced plans to add 33 convenience stores and smaller grocery locations by the end of 2011, with an additional 53 by year€™s end 2012.

Tesco will open around a 150 convenience stores annually during this time period, while Sainsbury will launch between 50 and 100 convenience stores. Adsa will add more than 140 smaller footprint stores with its Netto acquisition and Wm Morrison will test a convenience store format soon.

"Convenience stores have emerged as a key front in the capital war that the big four supermarkets are engaged in," said Dave McCarthy, an Evolution Securities analyst. "Tesco and Sainsbury in particular are both very committed to this format as they fight for every ounce of market share they can get."

Sainsbury is targeting urban locations with its convenience stores, said CEO Justin King. "Pretty much every single one of those is on what you would call a high street or a town center," he said of the new openings. Currently Sainsbury€™s total real estate in town, district or neighborhood centers is around 65 percent.

But Sainsbury opened fewer convenience stores last year because of lack of suitable locations in those areas. Wm Morrison also has run into difficulties targeting town centers for stores.

"It€™s true to say there is an increasing number of empty shops in town centers," said Terry Hartwell, Morrison group property director. "You have to ask yourself why. They are quite often in the wrong location or the rents are too high and therefore people can€™t make them work. You can€™t just say, well, because there are lots of empty shops on the high street, convenience stores are the answer."

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