Supermarket selling space shrinks by one million square feet as grocery multiples suffer

The total floorspace owned by Britain’s supermarkets has shrunk by over a million square feet in the past year – the equivalent of 13 football pitches – the first reduction in more than a decade, according to a story in the Mail on Sunday newspaper yesterday (September 20).

In the piece, analysts  examined the largest groups going back to 2004, when Tesco was almost half its current size, finding that the multiples have been hit by what has been described as a “perfect storm” in the past 12 months, with the implementation of price cuts aimed at undermining rivals and meeting the threat posed by discounters Aldi and Lidl, the falling cost of some foods, 0% inflation and the looming impact of the Government’s new national Living Wage.

The net reduction of floorspace – the result of closures or sale of sites – contrasts with the fastest rate of growth in 2009 when the biggest eight store groups grew by almost ten million square feet. Tesco, the Co-Op and Morrisons have all closed or sold off stores, and only Aldi and Lidl seem to be opening new ones, each adding about 500,000sq ft of retail spaceto their estates per year.

Analyst Bruno Monteyne told the Mail on Sunday that even excluding the Co-op, which has been forced into a major restructuring (closing 350,000sq ft or retail spacew and selling off its pharmacy chain to Bestway), space growth is at its slowest for years.

“This is a major change in trend,” he said. “For the previous nine years space grew on average by 4.9% and volumes grew by 0.5%. What a mismatch in supply and demand.”

He said the move towards a reversal of the previous trend meant supermarkets “could begin to become much more efficient.”

But Lidl put further pressure on UK retailers last week when it signalled a pay rise for staff ahead of demands made by Chancellor George Osborne for a minimum wage of £7.20 an hour from next April.

Lidl said that from next month (October) it would be the first food retailer to implement ethical pay levels as recommended by the Living Wage Foundation. Its employees will earn a minimum of £8.20 an hour in England, Scotland and Wales and £9.35 an hour in London. Currently, Lidl pays its staff a minimum of £7.30 an hour, with those in London getting £8.03.

Supermarket analyst David Gray, at Planet Retail, said: “It’s great news for Lidl’s workforce and is partly driven by the fact they’re doing well and they have more cash available. But they also operate a more efficient model – as you might see from the pallets on the shop floor – and each store has fewer staff.”

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