Viewpoint – hypermarkets wither and coffee shops explode

Retail Insider and K3 Retail bring you the first in a new monthly column taking a look at some of the most pertinent and interesting topics of the day in the big wide world of retail.

What role the hypermarket overseas?

The woes of Tesco have certainly been well aired over recent months and the imminent departure of chief executive Philip Clarke provided yet another opportunity for retail commentators to highlight the problems the company has with its large hypermarkets in its core UK market.

This has been recognised for some time by the company and is behind its ongoing move to put Giraffe restaurants, Emporium Bakeries and Harris + Hoole coffee bars in these large sheds.

There has also been a shift to instead open more convenience stores. Between them Tesco, Sainsbury’s and Morrison’s will this year open 750 million sq ft of convenience store space in the UK, which is a pretty clear indicator that shoppers are shifting en masse from driving to out-of-town hypermarkets to instead walking to their local convenience stores.

This represents a seismic shift in the shopping habits of UK consumers. But despite the ructions it is causing Tesco, it is at least addressing the issue in its domestic market. However, what is less clear is exactly how this trend will manifest itself in the overseas markets in which Tesco operates and which have been its major driver of future growth.

Will there be a shift away from hypermarkets to more convenience stores as we are seeing in developed markets. You’d have to think so. In that case Tesco has issues to address around the globe.

The other thing that must be worrying the company is in the emerging markets such as India and China – where it has yet to have any significant presence. What will the role of the hypermarket play long term in these countries?

Will they even get off the ground in any sort of scale? The reason to open in these markets is to replace the existing infrastructure – of very small ‘convenience’ stores or in many cases tinny kiosks – with bold new ‘Western’ ways of shopping via the good old hypermarket model.

But as we see increasing moves to convenience, does a role really exist in these territories for a large scale replacement to the entrenched status quo with arguably outdated enormous sheds. This is a big question and just one more thing that the incoming CEO of Tesco will have to contend with.

Coffee shops perk up high streets

Warnings that the froth was about to be blown off the coffee shop market were a common occurrence a decade ago when the likes of Starbucks, Caffé Nero, and Costa Coffee were going hell for leather with their store openings.

Ten years on and they are all still hell bent on pursuing their aggressive opening strategies and have since been joined by other expanding parties – including Tesco-owned Harris + Hoole. What has changed though is the fact the warnings of saturation on the high street have long since stopped.

Nobody now questions the situation of having a different branded coffee shop on all the four corners of a crossroads in a town centre. This is because rather than being seen as something of a fad the coffee shop is now an engrained feature of UK life for all demographics around the entire UK.

In fact, rather than previously being seen as a potential blight on the high street – should the coffee shop bubble have deflated and left vacant units – they are now regarded as something of a saviour of the troubled high street.

A recent report from analysts Allegra Strategies found that 95% of people surveyed feel that coffee shops improve the vitality and wellbeing of high streets. They also boost the local economies – by up to 4% – through a combination of increasing footfall by as much as 28% and elongating the time 52% of consumers spend shopping in town centres.

The positive effect on retailers is significant – as many as 58% of local businesses indicated that coffee shops attract more people to their businesses, which compares with a much lesser 38% when the same survey was carried out in 2010.

Mine’s an Americano – with hot milk on the side – and a croissant.

K3 Retail deliver multi-channel solutions that enable retailers to create joined up shopping experiences for their customers whether they choose to buy on-line, direct, in-store or via mobile. It has over 20 years’ experience delivering award winning solutions, to more than 175 internationally recognised retail brands.