THE INVESTOR
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17
Plain Picture
Balance sheet
The food retail industry is changing,
with more consumers prepared to buy their groceries
from online sites or smaller convenience stores. As a
result the big four are looking to keep up with the times
in order to attract shoppers and build loyalty.
dark stores and ordinary supermarkets to fulfil
customer orders. In each case, however, home
delivery is a cost burden, so many are turning
to click and collect as a compromise – where
goods are ordered online but collected from
stores. Not only do consumers appreciate the
flexibility of click and collect, but it is far less
burdensome for supermarkets.
‘Differing models of click and collect are
a key option that retailers are exploring,’ says
Julie Carlyle of Ernst &Young.
Looking ahead, however, food retailers
face a difficult future. In the 12 weeks to 3
February, the grocery market grew by 2.4%,
the slowest growth since 2005
2
. Saddled with
large, expensive superstores, increasingly
demanding customers, an intensely
competitive landscape and persistent food
inflation, they have scant room for manoeuvre.
‘Over the long term, they will have
to find alternative uses for some of their
superstores,’ says Sam Hart, analyst at
Charles Stanley.
The British Retail Consortium agrees, but
makes the point that change has already
begun.‘The offer is changing. Many stores
are incorporating restaurants and cafés
into their sites, as well as other leisure
pursuits.The idea is to turn these stores
into destinations,’ says Lim.
Whatever individual players choose to
do, the outlook remains uncertain. Recently,
Sainsbury’s has been the best performer
among the big four, with Morrisons lagging
well behind andTesco struggling to stay
on top. Looking ahead, the winners will
be those who manage to stay close to their
customers, keep a grip on costs and work
out how best to make the internet pay.
‘They need to be innovative, they need to
invest in multi-channel just to keep up with
rivals and they need to try and make online
shopping more profitable,’ says Lim.
It’s a tall order.
1 Tesco interims to Aug 2013 and Sainsbury’s interims to
Sept 2013
2 Kantar Worldpanel Grocery Market Share UK
sector watch
