Space

This post originally appeared on LinkedIn, and has been republished here in full.

Not the galaxy, but in Tesco – who do have a galaxy of their own with the space in stores. A far cry from not so long back, where rumours of an overstock reduction would see warehouses ‘freed up’ to create space for the Tesco Bank branches in every store.

Seems light years away that…. (enough of the space puns), but Tesco do possess a real issue that no one has managed to yet solve (or even come close to in reality). That is, what do with the goliath stores? Under performing stores that are huge in size – needing extra hours just to have people around the shop…..

Philip Clarke acknowledged the need to resolve the space issue, and bought Giraffe, with the intention of hiving space to the restaurant in stores, however that meant that customers would shop post meal, not ideal when trying to grow like for like sales….

To almost sum up the reign of Clarke, they then opened up numerous Extra stores under his reign whilst admitting there was a space issue, just look how many large sites were stopped by Dave Lewis when he took charge…..

Watford was the bright spark (some two years ago now remarkably) and the ‘store of  the future’ had other retailers (some part owned by Tesco) yet the store remained over 100,000 sq.ft. After a disappointing trip to the Harry Potter studio’s, I took Mrs Dresser along to the Harry Potter world of food retailers (Watford, keep up!) – her words – ‘the store is too big’.

She perhaps summed up in a sentence what various, seasoned analysts had struggled to do in 2-3 months of trying regarding Watford…

That is the key issue – too many Tesco stores are too big. How do you resolve such an issue? Third party concessions are the ideal solution, but local trials don’t appear to offer a national solution and wider retail is hardly stable at the minute.. There are many defensive stances being adopted across luxury and non food given online and discounter trends.

The retailers in growth who want the space are the ones Tesco do not want – B&M, Home Bargains, Aldi, Lidl and co would be akin to leaving the back door open for the resident crooks.

So what do they do? There’s a low appetite for risk in terms of new ventures – whilst I’m unfamiliar with the dynamics – a wholesale offer, perhaps under the One Stop banner would be interesting.

Cash/Carry is a growing sector and the success of Costco (albeit with a membership scheme) is notable, as is the growth of Booker. Tesco have the sites in many respects and also possess the access for smaller trucks. Half the battle?

The offer, products, dynamic, mechanics would need to be resolved but it could be a useful way to section off space in some of their largest, under performing stores.

Without a new venture; who else is around? There are a few retailers who are in trial, Mothercare for example have a concession in the modern Extra near Liverpool – however these are limited.

Discounters are the disruptor and they reset so many benchmarks – the 6 P’s is a great framework to analyse discount. But what about the shopping trip? 20 minutes to get a 75% full cupboard or 40-60 minutes around a large Tesco?

There is no silver bullet, no magic solution. Space remains the major issue on the horizon for Tesco – with no obvious answers…..

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Grocery Insight provide market insight on the UK sector with a focus on individual retailers such as Tesco. This insight is useful to various stakeholders and due to my store based focus. Insight can be delivered to suppliers to focus on growth opportunities, analysts and investors to assess the business performance and long term outlook and retailers themselves to assess best practice.