UK Neighbourhood Retailers 2012

UK Neighbourhood Retailers 2012: Examines the latest developments in neighbourhood retail, providing comprehensive analysis of the location to identify the key issues impacting it and how opportunities for growth or survival can be found. The size of the market is detailed, with five year forecasts and analysis of emerging trends. Key retailers in the sector are profiled and critically assessed.Key metrics of neighbourhood retail: sales growth, space, store numbers, store sizes and sales densitiesAnalysis of convenience stores and small grocers, off-licences, CTNs, food specialists and pharmacies in neighbourhood locationsProfiles of key players operating in the location, including operating statistics, recent key events and outlook and market shares for 2007 to 2012Comprehensive analysis of the issues impacting the market, identifying emerging trends and growth opportunities, recommending strategies for successContinuing inflation will have less impact on the neighbourhood sector than other locations. Shoppers tend to be less price sensitive in neighbourhood stores, prioritising convenience over low prices. Moreover, these stores benefit from distress purchases – unplanned and urgent shopping trips, where immediate needs negate price sensitivity.As the neighbourhood market becomes more mature for Sainsbury's and Tesco, they are improving their offer to maximise sales. However, what is really driving innovation in the sector is the entry of new players – changing expectations of a multiple's neighbourhood store. Waitrose and Morrisons have introduced a focus on fresh and quality products.Symbol groups ability to maintain a lower level of member churn will be key to future growth. By improving their product ranges and support packages, symbol operators will encourage more retailers to remain with themUnderstand the changing dynamics of the location, its composition and key charactestics of shoppers in neighbourhoodAnalyse the impact of the ongoing and evolving growth of grocers in the sector. How will this impact range development?Assess strategies for survival as an independent retailer

Table of contents

EXECUTIVE SUMMARY
•Key findings
Neighbourhood location dynamics changed by top-up shopping and entry of more grocers;
•Main conclusions
Neighbourhood market growth outpaces out-of-town and town centre
Inflation slow to penetrate mindset
Grocers expansion in convenience continues
New entrants Morrisons and Waitrose revamp market
Symbols switch focus from recruiting to retaining members
Independents should specialise and leverage local ties
CTNs will struggle to remain relevant
Neighbourhood pharmacies benefit from increased footfall
KEY ISSUES & OUTLOOK
•Neighbourhood market evolves as top-up shopping continues
Changing market dynamics for neighbourhood retailers
•Neighbourhood market provides relief from inflationary pressures for retailers
As inflation continues less price sensitivity in the neighbourhood will suit retailers ...
Convenience is king in neighbourhood shopping – including distress purchases
Tiered pricing will alleviate pressure on grocers in neighbourhood stores
High-end specialists have a natural advantage in price sensitivity
… but price-focused campaigns will increase shopper sensitivity to inflation
Symbols and non-specialists most vulnerable
•Grocer expansion endemic …
Top-up shopping becomes a norm
Online shopping drives footfall to neighbourhood
Expansion through convenience stores provides relief from pressures on sales densities
… changing the shape of neighbourhood retailing
With new entrants comes innovation
Building a bigger neighbourhood market
•Independents need new strategies to attract loyalty
Future is uncertain for independents
Key characteristics of survival
Investment in loyalty key to future neighbourhood growth
Smaller retailers will struggle to keep up as competition intensifies ...
… but different loyalty dynamic will combat encroaching multiples
•Key strategies for success
NEIGHBOURHOOD VS OTHER LOCATIONS
•Strong performance from neighbourhood retail as multiples target expansion
Neighbourhood retail outperforms as customers cut back;
Out-of town-space grows as town centre contraction settles;
Neighbourhood densities set to rise as weaker players exit;
Neighbourhood store numbers continue to fall as consolidation continues;
Town centre underperforms as neighbourhood set to outstrip total store based retail.
•Retail sales by location
Neighbourhood retail outperforms as customers cut back
•Space by location
Out-of town-space grows as town centre contraction settles
•Sales densities by location
Neighbourhood densities set to rise as weaker players exit
•Store numbers by location
Neighbourhood store numbers continue to fall as consolidation continues
•Forecast
Town centre underperforms as neighbourhood set to outstrip total store based retail
Expenditure
MARKET ANALYSIS & FORECAST
•Definition
•Growth continues as grocers expand
Weaker players squeezed out as grocers continue to dominate
•Forecast
Space
CONVENIENCE STORES SUB SECTOR & FORECAST
•Grocers continue to shape new market dynamics
•Recent key events
Grocer expansion continues in neighbourhood
•Forecast
Trend set to steady but continue
TRADITIONAL RETAILING SUB SECTOR & FORECAST
•Neighbourhood pharmacies
Growth in neighbourhood continues in line with wider pharmacy sector
Outlook
•Traditional CTN operators
Ongoing expansion of grocers continues to bring casualties
Outlook
Bleak future for traditional CTNs
•Off-licences
Market available to specialists dwindles
Outlook
•Traditional food specialists
Fresh focus from grocers brings new challenge
Outlook
Opportunities for strongest survivors
COMPANY DATA ANALYSIS
•Major neighbourhood retailers compared
The Co-op continues to gain share in its core market
BOOTS
•Ongoing expansion maintains neighbourhood share
•Recent key events
Develops services and builds partnerships
•Proposition
•Financials
Slower sales growth likely
•Space
Exploring niche opportunities
•Sector performance – neighbourhood
•Market shares
•Outlook
NHS changes will provide opportunities and challenges
COSTCUTTER
•Parent's investment will promote future growth
•Recent key events
Development to generate loyalty among members
•Financials
Sales growth continues in tough surroundings
•Stores
•Sector performance – neighbourhood
Set to outperform market in 2011
•Market shares
Will benefit from continued space expansion
•Outlook
Future focus with new backing
LLOYDS PHARMACY
•New strategy needed to improve profits and growth
•Recent key events
Cuts costs and develops services and marketing
•Proposition
•Financials
Space reductions hit sales growth
•Space
Space contracts due to store closures
•Sector performance – neighbourhood
•Market shares
•Outlook
New sources of growth needed outside traditional markets
MARTIN MCCOLL
•Recet key events
Converting into convenience chain
•Market share
•Outlook
New trading director
MUSGRAVE
•Potential victim of larger grocers expansion in neighbourhood
•Recent key events
Seeks to improve competitive positioning through lower pricing and new products
•Financials
•Stores
Growth improves in 2011 as independents join up
•Sector performance – neighbourhood
•Market shares
•Outlook
Increased competition is a major threat, while the travel retail channel poses opportunities
PREMIER (BOOKER)
•Support of large parent provides strength
•Recent key events
Range development helps improve offer
•Financials
Sales growth continues as wholesaler expands its customer base
•Stores
•Sector performance – neighbourhood
•Market shares
•Outlook
Booker's reach provides opportunity for further growth
SAINSBURY'S
•Continued expansion in neighbourhoods backed by focus on affordable indulgence
•Recent key events
Repositions to communicate value
•Financials
Space boosts sales but densities suffer
Steady increase in margins as sales continue to grow
•Stores
Ambitious expansion continues with new locations providing solid growth
•Sector performance – neighbourhood
•Market shares
•Outlook
Extends reach while improving core offer
SPAR
•Format rollouts and range development drive growth
•Recent key events
Develops ranges and stores
•Financials
•Stores
•Sector performance – neighbourhood
•Market shares
•Outlook
Investment in stores sets future agenda
TESCO
•Store expansion focused on the Express banner
•Recent key events
Differentiates as competition intensifies
•Financials
New space drives sales growth
•Stores
Sustains space growth despite recession
•Sector performance – neighbourhood
•Market shares
•Outlook
Organic growth remains tough, pushing Tesco to improve offer and range
THE CO-OP
•Continues to rebrand Somerfield stores to The Co-op banner
•Recent key events
Experiences management changes and focuses on ethical values
•Financials
Sales growth levels out as Somerfield integration nears completion
•Stores
Ambitious expansion plans ahead
•Sector performance – neighbourhood
•Market shares
•Outlook
Future expansion must be tactical
OFF-LICENCES
•Bargain Booze
•Laithwaites
•Majestic Wine
•Oddbins
OTHER KEY SYMBOL GROUPS
•Best-one (Bestway)
•Lifestyle (Landmark Group)
•Mace (Palmer & Harvey McLane)
•Nisa-Today’s
APPENDIX
•List of abbreviations
•Ask the analyst
•Verdict consulting
•Further reading
•Disclaimer
TABLES
•Table: Retail location definitions 2011
•Table: Retail spending by location at current prices 2002–12e
•Table: Floorspace neighbourhood vs all stores 2002–12e
•Table: Sales densities by location at current prices 2002–12
•Table: Store numbers by location 2002–12e
•Table: Neighbourhood retail sales vs total retail spending 2001–15e
•Table: Neighbourhood market definition and methodology 2011
•Table: Sales via neighbourhood location 2002–12e
•Table: Sources of growth for neighbourhood retailing 2002–12e
•Table: Retail distribution of neighbourhood expenditure 2011e and 2012e
•Table: Neighbourhood sales, space, density & store numbers 2002–12e
•Table: Retail distribution of neighbourhood expenditure 2010 and 2015e
•Table: Convenience stores in the neighbourhood 2007–12e
•Table: Convenience stores in the neighbourhood 2010–15e
•Table: Neighbourhood pharmacy market 2006–11e
•Table: Neighbourhood pharmacy market 2010–15
•Table: Traditional CTN operators market 2006–11e
•Table: Traditional CTN operators market 2010–15e
•Table: Off-licences market 2006–11e
•Table: Off-licences market 2010–15e
•Table: Neighbourhood food specialists market 2006–11e
•Table: Total food specialists sales 2001–11e
•Table: Total food specialists sales by type of specialist 2006–11e
•Table: Neighbourhood and total food specialists sales breakdowns 2011e
•Table: Neighbourhood food specialists market 2010–15e
•Table: Neighbourhood market shares of Top 10 retailers 2006–11e
•Table: Table Title
•Table: Boots company information 2011
•Table: Boots retail proposition 2011
•Table: Boots UK key operating statistics 2007–12e
•Table: Boots UK store profile 2007–12e
•Table: Boots neighbourhood retail trading record (calendar years) 2006–11e
•Table: Costcutter company information 2011
•Table: Costcutter UK key operating statistics 2007–12e
•Table: Costcutter UK trading record 2002–12e
•Table: Costcutter UK store portfolio 2002–12e
•Table: Costcutter neighbourhood retail trading record (calendar years) 2006–11e
•Table: Lloydspharmacy company information 2011
•Table: Lloydspharmacy retail proposition 2011
•Table: Lloydspharmacy key operating statistics 2006–11e
•Table: Lloydspharmacy trading record 2001–11e
•Table: Lloydspharmacy store portfolio 2001–11e
•Table: Lloydspharmacy neighbourhood retail trading record (calendar years) 2006–11e
•Table: Martin McColl key operating statistics 2006–11e
•Table: Musgrave company information 2011
•Table: Musgrave UK key operating statistics 2006–11e
•Table: Musgrave UK retail sales of partners 2006–11e
•Table: Musgrave UK store numbers 2006–11e
•Table: Musgrave neighbourhood retail trading record (calendar years) 2006–11e
•Table: Premier company information 2011
•Table: Premier UK key operating statistics 2007–12e
•Table: Premier wholesale UK trading record 2002–12e
•Table: Premier UK store portfolio 2002–12e
•Table: Total neighbourhood retail trading record (calendar years) 2006–11e
•Table: Sainsbury's company information 2011
•Table: Sainsbury's UK key operating statistics 2007–12e
•Table: Sainsbury's trading record trading record 2002–12e
•Table: Sainsbury's UK store portfolio 2002–12e
•Table: Sainsbury's store profile March 2011
•Table: Sainsbury's neighbourhood retail trading record (calendar years) 2006–11e
•Table: SPAR company information 2011
•Table: SPAR UK key operating statistics 2007–12e
•Table: SPAR UK trading record 2002–12e
•Table: SPAR UK store portfolio 2002–12e
•Table: Total neighbourhood retail trading record (calendar years) 2006–11e
•Table: Tesco company information 2011
•Table: Tesco UK key operating statistics 2007–12e
•Table: Tesco UK trading record 2002–12e
•Table: Tesco UK store portfolio 2002–12
•Table: Tesco store profile August interims 2011
•Table: Tesco neighbourhood retail trading record (calendar years) 2006–11e
•Table: The Co-operative Group company information 2011
•Table: The Co-op food retail key operating statistics 2007–12e
•Table: The Co-op trading record trading record 2002–12e
•Table: The Co-op store portfolio 2002–12e
•Table: The Co-op neighbourhood retail trading record (calendar years) 2006–11e
•Table: Profile of other key symbol groups 2011
FIGURES
•Figure: Grocers central to changing neighbourhood market dynamics 2012
•Figure: Neighbourhood provides bubble of protection as inflation continues 2012
•Figure: Inflation may infiltrate as price focus increases, exposing non-specialists 2012
•Figure: Tesco, Sainsbury's & ASDA price-focused campaigns 2012
•Figure: Factors pushing grocers to expand into neighbourhood 2012
•Figure: Growth in space and decline in sales densities % 2010–15e
•Figure: little Waitrose Amersham branch instore bakery 2011
•Figure: M Local instore images of fresh focus in bakery and vegetables 2011
•Figure: Evolution of independents 2012
•Figure: Costcutter premium myCostcutter fascia 2011
•Figure: Tesco Clubcard proposition November 2011
•Figure: Wedge local reward card website November 2011
•Figure: Morrisons let's grow campaign for local schools 2011
•Figure: Key strategies for success 2012
•Figure: Growth of retail sales by location (excluding non-store) 2002–12e
•Figure: Y-o-y change % in retail space by location 2002–12e
•Figure: Growth of sales densities by location 2002–12e
•Figure: Y-o-y change % in store numbers by location 2002–12e
•Figure: Retail spending by location 2010 and 2015e
•Figure: Neighbourhood spending growth vs retail overall 2001–15e
•Figure: Neighbourhood market sales 2007–12e
•Figure: Neighbourhood breakdown of market share by type of retailer 2012e
•Figure: Composition of neighbourhood retail market 2011e and 2012e
•Figure: Neighbourhood sales density, space & stores growth 2002–12e
•Figure: Components of neighbourhood food market sales 2015e
•Figure: Neighbourhood space 2010–15e
•Figure: Neighbourhood store numbers 2010–15e
•Figure: Convenience stores in the neighbourhood 2007–12e
•Figure: Convenience stores neighbourhood market share % 2007–12e
•Figure: Spending growth via convenience stores vs neighbourhood overall 2010–15e
•Figure: Neighbourhood pharmacy store sales 2006–11e
•Figure: Pharmacy stores neighbourhood market share % 2006–11e
•Figure: Spending growth via neighbourhood pharmacies vs neighbourhood overall 2010–15
•Figure: Traditional CTN operators sales 2006–11e
•Figure: Traditional CTN operators neighbourhood market share 2006–11e
•Figure: Spending growth via CTNs vs. neighbourhood overall 2010–15e
•Figure: Off-licences sales 2006–11e
•Figure: Off-licences neighbourhood market share 2006–11e
•Figure: Spending growth via off-licences vs neighbourhood overall 2010–15e
•Figure: Neighbourhood food specialists sales 2006–11e
•Figure: Neighbourhood food specialists share of neighbourhood market 2006–11e
•Figure: Spending growth neighbourhood food specialists vs total food specialists 2006–11e
•Figure: Spending growth via neighbourhood food specialists vs n'hood overall 2010–15e
•Figure: Spending growth via n'hood food specialists vs total food specialists 2009–14e
•Figure: Neighbourhood market share changes of Top 10 retailers 2011e on 2006
•Figure: Boots pharmacy fascia 2011
•Figure: Boots neighbourhood sales (incl VAT) 2006–11e
•Figure: Boots share of total neighbourhood market 2006–11e
•Figure: Boots pharmacy opportunities & threats 2011
•Figure: Costcutter fascia 2011
•Figure: Costcutter's new fascias 2011
•Figure: Costcutter website 2011
•Figure: Costcutter UK retail sales and growth to April 2007–12e
•Figure: Costcutter neighbourhood sales including VAT 2006–11e
•Figure: Costcutter share of total neighbourhood market 2006–11e
•Figure: Local Saver loyalty card 2011
•Figure: Lloydspharmacy new fascia 2011
•Figure: Lloydspharmacy neighbourhood sales (incl VAT) 2006–11e
•Figure: Lloydspharmacy share of total neighbourhood market 2006–11e
•Figure: Lloydspharmacy opportunities & threats 2011
•Figure: Martin McColl neighbourhood sales (incl VAT) calendar years 2006–11e
•Figure: Martin McColl neighbourhood market share 2006–11e
•Figure: Musgrave fascias 2011
•Figure: Budgens Price Crash meal solution 2011
•Figure: Budgens fresh fish offer– sea to shelf in 36 hours 2011
•Figure: Musgrave UK sales of all retailers and growth 2006–11e
•Figure: Musgrave neighbourhood sales including VAT 2006–11e
•Figure: Musgrave share of neighbourhood market 2006–11e
•Figure: Premier fascia 2011
•Figure: Euroshopper 2011
•Figure: Premier wholesale UK sales and growth to March 2007–12e
•Figure: Premier neighbourhood sales including VAT 2006–11e
•Figure: Premier share of total neighbourhood market 2006–11e
•Figure: Sainsbury's Local fascia 2011
•Figure: Fresh Kitchen – Sainsbury's food-to-go concept 2011
•Figure: Sainsbury's tagline Live well for less 2011
•Figure: Sample coupon Sainsbury's Brand Match 2011
•Figure: Sainsbury's UK sales and growth to March 2007–12e
•Figure: Sainsbury's operating profit to March 2006–11
•Figure: Sainsbury's neighbourhood sales including VAT 2006–11e
•Figure: Sainsbury's share of neighbourhood market 2006–11e
•Figure: Sainsbury's UK coverage 2011
•Figure: SPAR fascia 2011
•Figure: SPAR S Budget range 2011
•Figure: SPAR Our very own range 2011
•Figure: SPAR UK sales and growth to April 2007–12e
•Figure: SPAR neighbourhood sales including VAT 2006–11e
•Figure: SPAR share of neighbourhood market 2006–11e
•Figure: Tesco neighbourhood fascias 2011
•Figure: Flash in the Pan concept 2011
•Figure: Tesco UK retail sales (ex VAT) and growth to February 2007–12e
•Figure: Tesco UK operating profit to February 2006–11
•Figure: Tesco neighbourhood sales including VAT 2006–11e
•Figure: Tesco share of neighbourhood market 2006–11e
•Figure: The Co-operative food fascia 2011
•Figure: New Truly Irresistible range 2011
•Figure: The Co-op UK sales and growth to January 2007–12
•Figure: The Co-op operating profit to January 2006–11
•Figure: The Co-op neighbourhood sales including VAT 2006–11e
•Figure: The Co-op share of neighbourhood market 2006–11e
•Figure: Nisa-Today's new Locó fascia 2011

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