European hypermarket format losing ground?
hypermarket format, amidst growing market pressure from competition
watchdogs, discount retailers and planning legislators.
Hypermarkets will account for seven per cent of food stores in 2009 - down from eight per cent in 2000 - as retail giants feel the squeeze of a mature grocery market, warn London-based market analysts Planet Retail.
Bryan Roberts, Planet Retail analyst, predicts the burgeoning convenience sector and discount groups will seize the opportunity to grow in the highly competitive European food industry, working to redress the power that top hypermarket retailers hold.
"Looking at historical statistics from the last five years and the forecast for the next five years, we will see discounters, convenience stores and drugstores gaining a lot of ground on the traditional retail formula," he told FoodandDrinkEurope.com.
Rising land costs, planning restrictions and increased competition from discount and convenience formats are all taking their toll on the hypermarket model, which was first introduced to Europe by Carrefour in 1963.
"Property restrictions in France, UK, Holland and other Western European countries mean an upper ceiling of what can be built. In markets like the UK retailers are realising that it's profitable to return to the High Street," said Roberts.
But senior economic analyst at IGD, James Walton, is confident the hypermarket formula is here to stay.
"All leading retailers are strongly wedded to the hypermarket concept and they would not be doing that if they thought it wasn't going anywhere," he said.
"Hypermarkets are a vibrant format with a long way to run, they've just got to raise their game if they want to compete with discounters."
But the hypermarket formula may not be effective in tapping Eastern European markets, where many multinational firms are trialling smaller stores to appeal to the different needs and spending power of local consumers.
Due to the size of the towns and the low level of income, larger hypermarkets cannot sustain a profitable business outside major commmercial centres in countries like Poland, Hungary and Romania.
So inevitably the large Western European food retailers will need to adapt to fit consumer demand in the countries they enter, rather than apply a uniform strategy across Europe's variant grocery market.
And the traditionally Western-style hypermarket format - which relies on high disposable incomes and large population density - may be the first victim as supermarket giants change tack and set their sights further afield.
