Much of the narrative accompanying the turmoil in UK food retailing today has referenced an unforeseen shift in shopping habits: more frequent shopping trips, spreading spend across a wider range of stores and locations, and the consequent shift in trading economics. The change in shopping behaviour has certainly been profound but should it have been so unforeseen?
Since 2008, the four majors market shares have ebbed and flowed but combined, they were around 75% back then and are the same today. To varying degrees, they have been pumping investment into online and convenience stores. Both channels have encouraged shoppers to fragment their purchasing trips, and cannibalise the existing store estates built at huge cost. Developing these two channels was not wrong but it is clear that the majors did not understand the strategic consequences of self-cannibalisation. Indeed, they did not foresee that what they were doing was likely to cannibalise.
Against the background of static market shares, the four majors have expanded floorspace by 28% since 2008. This equates to an eye watering 20 million square feet of additional space. It is has taken the market leaders an awful long time to understand what they themselves have done to their own businesses.
Clearly, the debit crisis has made shoppers much more value-conscious. However, self-cannibalisation and fragmentation of shopping trips are self-inflicted wounds. The genie is now out of the bottle and the structure and economics of UK food retailing will never be the same.