Small stores are sexy again. What a turnaround.

Small stores are sexy again. What a turnaround. In the 1990s, superstores were all the rage – a curiously British phenomenon, born out of a restrictive planning regime. Continental Europeans were generally into hypermarkets.

British planners didn’t like hypermarkets as they feared the effect on other retailers and the high street. The British public didn’t seem that keen either. The French hypermarket giant Carrefour withdrew from the UK in the 1980s, and its stores were eventually subsumed into Asda in 1989. Asda then in turn struggled as its attempts to move upmarket undermined its hypermarkets’ low-price proposition.

But things changed in the mid-1990s as Tesco started growing its stores, quite literally. It began opening larger shops and extending superstores. In 1997, these large new hypermarkets gained a name – Tesco Extra.

They, together with a revived Asda, taught the British public to love hypermarkets. By the end of the 1990s, Safeway was building its own megastores and after that even Sainsbury’s was again building hypermarkets.

But no sooner had the British caught on to the Continentals’ enthusiasm for hypermarkets than the latter started to fall out of love with them. Both Carrefour and Metro have struggled for several years now.

Their hypermarkets try to be a one stop food/non-food shop solution without being particularly cheap. This has not been helped by high petrol prices that have put people off travelling further to large stores. Meanwhile the rise and rise of the discounters in Continental Europe has exposed further the poor value of those hypermarkets.

In most countries there is now a consumer trend back to smaller, local stores driven by higher travel costs, shoppers less wedded to routines of a Friday and Saturday big shop, and the improving quality of small stores – not least as so many are now run by big grocers.

The UK is clearly not immune to this trend either, with growing interest in small stores from the major multiples, initially led once again by Tesco.

The UK, however, is different in its resistance to the rise of discounters. Despite the PR hype about them, they remain stubbornly small. In 1996, discounters, including Kwik Save and Iceland, had a market share of 6.8%, according to Verdict.

By last year their share, with Kwik Save no more, had fallen to 6%. Incidentally with all the publicity about Iceland being up for sale as such a successful company, you might be interested that in 1996 its market share was 1.7%, which by last year had grown to all of 1.8%.

So, small stores are all the rage across Europe. The only difference in the UK is that convenience is a much more important driver than price. This certainly suits the big multiples, and explains why there is such a land grab going on, extending even to little old Iceland. Or maybe it’s just love in a cold climate?

  • Simon Laffin - Independent retail adviser and non-executive director