Commentary from PlanetRetail.net…
Given that Asda spends much of its time proclaiming the opening of its Asda Wal-Mart Supercentres, it has come as something of a surprise, albeit an eerily familiar one, that the company has announced that it will also be focusing on the opening of smaller supermarkets across the country.
Following successful trials of smaller stores in Bodmin (Cornwall) and Walthamstow (London), Asda is now planning to open as many as 300 17,000 to 30,000 sq. ft.. stores across the UK. According to CEO Tony De Nunzio, the aim is to open high street stores in small towns where the retailer would be unable to obtain planning permission for its larger sites.
The concept is particularly evocative for two reasons:
First, it echoes the march of the Neighborhood Market, the grocery-based supermarket format that has sent a chill wind through the US grocery retailing sector. Only 50 stores so far, but ten were opened in January alone and it remains fair to say that there are many grocery retailers in the US looking nervously over their shoulders. The idea is a clever one that could have repercussions in the UK – opening smaller stores avoids cannibalization and also avoids some of those pesky planning regulations that often thwart large-store developments.
Second, UK analysts will be experiencing a case of deja vu in the face of Asda’s newly discovered small-store ambitions. It was as recently as 2000 that Asda – in its first year as part of “the Wal-Mart family” - announced it was planning to invest around USD100 million to open 50 small-format Asda Fresh stores by 2005. The plan was to open stores of between 2,500 and 3,000 square metres that would focus on offering fresh foods and prepared meals. By the end of 2001, the Asda Fresh name had been given the elbow and there are still only seven of these stores trading – a good 86% shy of the initial target.
So, is there any reason to predict greater success this time around? Is Asda better equipped to deliver on its small store development programme? Or is someone just dusting off an old blueprint they found in head office?
The verdict must be a positive one. Asda has learned much from its parent, particularly in areas such as supply chain, pricing, logistics and non-food merchandising. These improved skills will be vital in providing Asda’s smaller stores with a USP in the UK’s crowded supermarket landscape - offering a decent mix of fresh food, ambient lines and non-food goods, combined with reliable in-stock levels and a price message that is second to none. Although still a long way short of Tesco and Sainsbury’s, Asda has also done much to improve its private label food lines, and this advance will also improve the prospects of its regained appetite for small-store operations.
One last thought. Cynicism is something we like to avoid, but we can’t help noticing that these plans indicate that Asda suspects that it could have around 300 smaller stores to play with in the near future. Anyone would think that they had just put in a bid for Safeway. Oh, they have, have they?
- KC's View: