Which supermarket will be the first to go?

[tzijlstra]

A popular topic on here, supermarkets. I had a chat this morning about the new Sainsbury's at Wadsley Bridge and it got me thinking: Which supermarket chain will be the first to perish?

 

My thoughts on the candidates (and I can't really decide).

 

Tesco: Massive drama in the boardroom at the moment, losing ground to the competition and a shareprice that has slipped more than anybody could have guessed some five years ago. They are still the biggest though and their "Metro" formula appears pretty successful. I think they will close more of the huge stores and simultaneously open more Metro's. They also have the most established online service.

 

Asda: All is quiet around Asda, the advantage of being owned by the biggest retail corporation in the world is obvious. But they always profiled themselves on price and that ground is quickly being eroded from under their feet by the rise of the German/Scandinavian discounters, Walmart could also decide that competition in the UK is becoming too fierce and pull the plug on them. Unlike Tesco, Asda has not really been great at developing a smaller/localised formula, even though they took over the Netto-chain. To me their smaller shops seem less busy than the Metro's. Unlikely to fail though, unless Walmart starts to struggle. Only big four supermarket that can rival Tesco in online service.

 

Sainsbury's: The more expensive of the big four, offers some quirky alternatives to them as well, but there is no denying that you pay more for your shopping here. They have put a lot of money into small stores and are seemingly on par with Tesco's, but like the smaller Asda stores, to me they seem a lot less busy. Their online offering is not as popular as either Asda or Tesco.

 

Morrisons: The problem child of the four? Years of mismanagement have seen them slide backwards, not jumping on the online market means they missed out, their new small stores are underperforming and have missed the point entirely (going by the one on Abbeydale Road, which is expensive and has horrible parking facilities). They sacked their CEO but he was the guy that finally got them to go online and small... seems to be a lot of panic, especially after finally introducing a 'clubcard' alternative.

 

Waitrose: Seemingly separated from all the nonsense of its lesser peers by its hautain position on top of the price-pack. It doesn't care that it is more expensive, it cares that the stuff you can buy is top quality and it does that well. As long as they don't do anything daft they should be fine. Their cooperation with Ocado is a winner as well, especially as they didn't enter the market way too late.

 

Aldi/Lidl/Netto: The thorns in the side of the big four, but no room for complacency for any of these, margins are small and the fact that there are three with a similar formula should point to a future where one of them wins out over the others. It is too early to say though as these relative newcomers have not finished expanding yet.

 

Co-op: The odd one out, the Co-op never was about competing on price or even quality? but on location and convenience. They never jumped into the mega supermarket market... but as the store in Hillsborough demonstrated: their current store stock is old and needs a lot of money and the Co-op does not seem to be in a position to provide that. What is perhaps less well known in this part of the country is that they have a very dominant position in rural parts of Britain and unlike the urban stores, these stores are generally modern and well-used.

 

So what do you think, which of these is likely to bite the dust first? Or do you think none of them will and instead we will see new additions to the market?

[JonBladesman]

A popular topic on here, supermarkets. I had a chat this morning about the new Sainsbury's at Wadsley Bridge and it got me thinking: Which supermarket chain will be the first to perish?

 

My thoughts on the candidates (and I can't really decide).

 

Tesco: Massive drama in the boardroom at the moment, losing ground to the competition and a shareprice that has slipped more than anybody could have guessed some five years ago. They are still the biggest though and their "Metro" formula appears pretty successful. I think they will close more of the huge stores and simultaneously open more Metro's. They also have the most established online service.

 

Asda: All is quiet around Asda, the advantage of being owned by the biggest retail corporation in the world is obvious. But they always profiled themselves on price and that ground is quickly being eroded from under their feet by the rise of the German/Scandinavian discounters, Walmart could also decide that competition in the UK is becoming too fierce and pull the plug on them. Unlike Tesco, Asda has not really been great at developing a smaller/localised formula, even though they took over the Netto-chain. To me their smaller shops seem less busy than the Metro's. Unlikely to fail though, unless Walmart starts to struggle. Only big four supermarket that can rival Tesco in online service.

 

Sainsbury's: The more expensive of the big four, offers some quirky alternatives to them as well, but there is no denying that you pay more for your shopping here. They have put a lot of money into small stores and are seemingly on par with Tesco's, but like the smaller Asda stores, to me they seem a lot less busy. Their online offering is not as popular as either Asda or Tesco.

 

Morrisons: The problem child of the four? Years of mismanagement have seen them slide backwards, not jumping on the online market means they missed out, their new small stores are underperforming and have missed the point entirely (going by the one on Abbeydale Road, which is expensive and has horrible parking facilities). They sacked their CEO but he was the guy that finally got them to go online and small... seems to be a lot of panic, especially after finally introducing a 'clubcard' alternative.

 

Waitrose: Seemingly separated from all the nonsense of its lesser peers by its hautain position on top of the price-pack. It doesn't care that it is more expensive, it cares that the stuff you can buy is top quality and it does that well. As long as they don't do anything daft they should be fine. Their cooperation with Ocado is a winner as well, especially as they didn't enter the market way too late.

 

Aldi/Lidl/Netto: The thorns in the side of the big four, but no room for complacency for any of these, margins are small and the fact that there are three with a similar formula should point to a future where one of them wins out over the others. It is too early to say though as these relative newcomers have not finished expanding yet.

 

Co-op: The odd one out, the Co-op never was about competing on price or even quality? but on location and convenience. They never jumped into the mega supermarket market... but as the store in Hillsborough demonstrated: their current store stock is old and needs a lot of money and the Co-op does not seem to be in a position to provide that. What is perhaps less well known in this part of the country is that they have a very dominant position in rural parts of Britain and unlike the urban stores, these stores are generally modern and well-used.

 

So what do you think, which of these is likely to bite the dust first? Or do you think none of them will and instead we will see new additions to the market?

 

Very interesting Tim. I was saying the other day it wouldn't surprise me if Morrisons sold out to someone like Aldi/Lidl.

[PeteMorris]

I might be wrong, and I don't have a link...but the likes of Tesco's and Sainbury's et al. Don't they have a huge portfolio of land they've bought, specifically for expansion? Which presumably won't be built upon now. I wonder if they'll sell those, or just sit on them.

 

As to your original question. Well personally, I think Tesco's might become the first victim, or at least have a drastic reduction in outlets. Did I read somewhere, some of their overseas outlets have closed? They have just got too big, too quickly, and what with dodgy accounting, and boardroom reshuffles, it doesn't exactly bode well for them.

[JonBladesman]

I might be wrong, and I don't have a link...but the likes of Tesco's and Sainbury's et al. Don't they have a huge portfolio of land they've bought, specifically for expansion? Which presumably won't be built upon now. I wonder if they'll sell those, or just sit on them.

 

As to your original question. Well personally, I think Tesco's might become the first victim, or at least have a drastic reduction in outlets. Did I read somewhere, some of their overseas outlets have closed? They have just got too big, too quickly, and what with dodgy accounting, and boardroom reshuffles, it doesn't exactly bode well for them.

 

Yes I've heard the same things. The problem with the likes of Tesco is that they got to big for their boots and lost touch with the customer. I've always thought that they were one of the most expensive out of the so called big four. As for their home delivery services... well I had a shocking experience once... never again!

 

I'm starting to think it's come full circle... I think shoppers are steadily going back to the days of smaller supermarkets.

[tzijlstra]

Very interesting Tim. I was saying the other day it wouldn't surprise me if Morrisons sold out to someone like Aldi/Lidl.

 

I'm not sure Morrisons store profile works for either of them, they tend to be bigger stores. Also, Aldi and I think Lidl are still family-owned businesses, their growth philosophy is to grow organically rather than through takeovers.

 

What wouldn't surprise me though is if one of the big French supermarkets dives onto a place like Morrisons, Casino or Carre Four maybe? Or Edeka from Germany... maybe even Ahold of the Netherlands. A lot of these will be looking at the share prices of British supermarkets and wondering if it offers the ideal time to expand market share in Europe and gain huge benefits of scale.

 

I might be wrong, and I don't have a link...but the likes of Tesco's and Sainbury's et al. Don't they have a huge portfolio of land they've bought, specifically for expansion? Which presumably won't be built upon now. I wonder if they'll sell those, or just sit on them.

 

As to your original question. Well personally, I think Tesco's might become the first victim, or at least have a drastic reduction in outlets. Did I read somewhere, some of their overseas outlets have closed? They have just got too big, too quickly, and what with dodgy accounting, and boardroom reshuffles, it doesn't exactly bode well for them.

 

They do own a lot of land, they will probably hang on to it as well because it helps shore up the balance sheet. The only reason they would end up selling it is if they really do run into massive liquidity trouble and need cash to sustain themselves.

 

Do you think we will see a lot of the big stores close Pete? You mention a reduction in outlets, it could certainly be one way of solving their problems, but I can't see them selling those buildings to anybody...

[PeteMorris]

Do you think we will see a lot of the big stores close Pete? You mention a reduction in outlets, it could certainly be one way of solving their problems, but I can't see them selling those buildings to anybody...

 

Well, it might be that they don't have a choice if things get really tight for them.

 

if they end up closing some of the mega-stores, they can't just leave them as is. They'll have to do something with them, and as you say above, it might be that the likes of a European store are poised and waiting.

 

Meanwhile, the current price war within the supermarket retail sector is very bad news for our farmers and suppliers, as they will be getting royally screwed on prices. I watched a news item about dairy farmers, and they were saying that it costs them 40p to produce a pint of milk, but are only getting 20p from the supermarkets.

[JonBladesman]

I'm not sure Morrisons store profile works for either of them, they tend to be bigger stores. Also, Aldi and I think Lidl are still family-owned businesses, their growth philosophy is to grow organically rather than through takeovers.

 

What wouldn't surprise me though is if one of the big French supermarkets dives onto a place like Morrisons, Casino or Carre Four maybe? Or Edeka from Germany... maybe even Ahold of the Netherlands. A lot of these will be looking at the share prices of British supermarkets and wondering if it offers the ideal time to expand market share in Europe and gain huge benefits of scale.

 

 

 

They do own a lot of land, they will probably hang on to it as well because it helps shore up the balance sheet. The only reason they would end up selling it is if they really do run into massive liquidity trouble and need cash to sustain themselves.

 

Do you think we will see a lot of the big stores close Pete? You mention a reduction in outlets, it could certainly be one way of solving their problems, but I can't see them selling those buildings to anybody...

 

I think what I was saying Tim is that it wouldn't surprise me if Aldi/Lidl took some of the smaller stores of Morrisions. Not the bigger ones. I only say this as there's one near me and think it would do well. Wouldn't fit their business model purchasing the bigger outlets.

 

---------- Post added 21-01-2015 at 13:24 ----------

 

Well, it might be that they don't have a choice if things get really tight for them.

 

if they end up closing some of the mega-stores, they can't just leave them as is. They'll have to do something with them, and as you say above, it might be that the likes of a European store are poised and waiting.

 

Meanwhile, the current price war within the supermarket retail sector is very bad news for our farmers and suppliers, as they will be getting royally screwed on prices. I watched a news item about dairy farmers, and they were saying that it costs them 40p to produce a pint of milk, but are only getting 20p from the supermarkets.

 

Sadly it's always the suppliers that get the brunt of it

[alchresearch]

I might be wrong, and I don't have a link...but the likes of Tesco's and Sainbury's et al. Don't they have a huge portfolio of land they've bought, specifically for expansion?

 

On BBC News this morning they showed Tesco's shelved plan for a massive development at an abandoned Wolverhampton hospital that was to be converted to a complete village - Tesco, other shops, small businesses, houses and flats.

[Dozer]

So Waitrose has a hautain position, does it? That sent me to the dictionary.

 

Good post, Tim. And not too hautain at all.

[PeteMorris]

On BBC News this morning they showed Tesco's shelved plan for a massive development at an abandoned Wolverhampton hospital that was to be converted to a complete village - Tesco, other shops, small businesses, houses and flats.

 

Yes I saw that...what a shame....lets hope someone completes the development in some form or another...that area needs it for sure...