So, with Tesco recently gobbling up Giraffe, are we about to see a new era of diversification among the UK’s leading grocers?

So, with Tesco recently gobbling up Giraffe, are we about to see a new era of diversification among the UK’s leading grocers? What’s clear is there is interest among the grocers in acquiring brands, which can be repackaged and utilised elsewhere, rather than simply sites.

It seems certain that Tesco is looking to add Giraffe stores into some of its locations - with the intention that the addition of the child-friendly restaurants will prove a magnet to families who are increasingly turning towards ecommerce.

It also means, of course, that bringing in specialist brands and concepts could help to solve the problem of what to do with all that excess space the big hypermarket players have built up over the past couple of decades. Hypermarkets used to draw in shoppers by offering an unparalleled wide range and low prices, but the arrival of ecommerce has eroded both of these USPs. As more and more non-food sales go online, what to do with all that space is a headache.

Bringing in brands and devoting space to new concepts and services could be one way to recreate big-box locations as true destinations. Carrefour has struggled to do something similar in France with its Planet model -adding Virgin as a brand to its entertainment category, for example.

Other hypermarket groups in Europe have attempted to solve the issue by turning non-food sales space in their stores into ecommerce fulfilment or discount areas - both of which are unlikely to attract the crowds. In fact, the reverse is likely.

One of the strangest things about deals such as Giraffe is the genuine surprise they create. “What? Tesco buying Giraffe? The restaurant chain? Why?” was a common reaction upon hearing the news.

But why wouldn’t such deals make sense? Tesco, a retailer that in recent years has invested in garden centres and coffee shops, is bound to look at new ways of supplementing stagnant growth at its big-box stores by diversifying into new areas and acquiring strong brands as it goes.

Such deals are therefore likely to become increasingly commonplace.

  • Rob Gregory, Global research director, Planet Retail