After recently claiming that supermarket estates are 20 years out of date, Waitrose managing director Mark Price has now warned that Britain’s ‘Big Four’ grocery chains may soon be forced to implement a programme of wide scale store closures.
Although chains such as Tesco and Sainsbury’s have already confirmed they will be reining in new store openings in future – in the past week or so, Tesco has scrapped plans to open two new stores despite the fact they have already been built – supermarket closures have remained minimal during the price war so far.
Even on the odd occasion a store has been closed, the supermarket brands have reallocated staff to newly opened convenience stores, thus minimising the toll such action could take.
However, Mr Price predicts that a more intensive phase of closures may be necessary, comparing the issues currently facing supermarkets to those of the DIY sector – Homebase, for example, has recently announced that it will close one in four stores in order to remain operational, with B&Q expected to follow suit in the near future.
Mr Price says; “I think that food is probably four or five years behind non-food.
“What you have seen over the last five years is 12 per cent of non-food space taken out of the market, yet you have no food space retired over that period: in fact, what you have been seeing is food space growing by 3 per cent to 5 per cent.
“So, more and more space has been added at a time before you get the impact of internet, convenience shopping and all the other shifts that we talked about.”
Mr Price also believes that the only way forward for the nation’s supermarkets is to completely reinvent themselves to meet the needs of the modern consumer.
This has already begun to occur in most major brands, with Tesco, Sainsbury’s and Asda in the midst of implementing strategic reviews, yet he warns that a more fundamental shift may be required rather than simply focusing upon lowering prices.
Sainsbury’s is currently the main focus for many analysts, having revealed last week that the brand suffered a pre-tax loss of £290 million and at the same time announced it will be cutting capital expenditure in the next three years by around £400 million per annum. However, HSBC retail analyst David McCarthy agrees with Mr Price in that cutting costs may not be enough to cause sales to rise in future.
He says; “Management of the industry by Sainsbury’s – and others – for the last five years or more and an unwillingness to recognise the fundamental changes in retailing has resulted in Sainsbury’s not being positioned well for the future.”
