Tesco.com - Competition Commission

High Streets and convenience

Harringay Express. We are designing our store fronts so that they blend in better with the local setting.

The changing face of the High Street

Over the last few decades, there are many factors that have contributed to changes in the High Street. More women now work. More people own cars and so the car-borne one-stop shop has for many replaced the daily trip down the High Street. In addition, because parking is often difficult in town centres, out of town retail centres have grown more popular. Our large out of town stores continue to serve customers who appreciate the convenience of shopping for groceries, household items, electrical goods and clothing all under one roof.

However, in the dynamic world of retailing things rarely stay the same for long. We, like others have identified changes in lifestyles that open up new opportunities – there are many people working long hours, with little time to cook or shop, who are looking to buy ready-made meals, preferably on the way home from work. Food shops located on the High Street or at the edge of town meet those needs, especially if they stay open late. In response to these changes we have seen the multiple retailers move back into the High Street or to the edge of town. In fact, many of our newer stores are built on previously developed land (brown-field sites) close to town centres, regenerating run down areas. They provide jobs for local people and, above all, signal a turning point in the fortunes of the town centre, attracting other retailers back to them.

Studies have shown that an investment by Tesco in a town or High Street means that the town and High Street benefits. The reason it benefits is because people stay in the area, they do linked trips and those linked trips cause other retailers to open. The mix of retailing may alter, that has never been in doubt. There may perhaps be a change in market share, say in groceries but other retailers do well. Coffee bars, kitchen shops and specialist retailers all do well.

In addition to this move back into town centres, we have also seen several retailers develop new smaller format stores, often situated close to consumers’ homes that better suit the needs of their changing lifestyles. In past inquiries the Competition Commission has treated shopping in these stores as a separate product market. However, we believe this distinction is inconsistent with the diffuse and mobile consumer demand for groceries that exists. In our view there is a single product market that operates nationally.

The return of the multiples and the benefits they bring

The benefits to consumers are clear:

• lower prices – overall our prices have fallen by 17% between 2000 and 2006 in real terms and the average premium in convenience stores compared to supermarkets of between 10% (IGD) and 30% (Goldman Sachs) is steadily coming down;

• a wider range of produce, including fresh food and healthy options – we have added around 8,000 new product lines in the last year alone and the range in our Express stores has increased by over 35% since 2000;

• better quality products – 99% of our suppliers say we maintain high quality standards;

• longer opening hours – around 370 of our stores are open 24 hours and our Express stores are conveniently open early in the morning until late at night;

• improved service – 85% of customers say their supermarket is "good/excellent".

Working with the grain of a changed planning regime

The return to the High Street of the multiple retailers has been demonstrably good for shoppers, but it has also been very much in line with planning policy. Town centres are part of our heritage and they are greatly valued. That is why in 1996 the Government introduced new planning guidance (the so-called sequential tests). These tests are intended to make the development of out-of-town stores more difficult and encourage supermarkets back into neighbourhoods and onto the High Street.

We have worked with the regime, as policy has changed, to open more stores in town centres and neighbourhoods. We have brought right back into the heart of many towns and district centres the benefits that shoppers expect from a supermarket, and that were previously available only in the large out of town stores. Supermarkets have increased choice, and hence the attractiveness of local centres as shopping destinations. Tesco stores have been demonstrably good for the High Street and neighbourhoods, not a threat to them, just as the planners envisaged.

Town centres that have thrived since Tesco arrived

This is not just theory or wishful thinking. It is confirmed by research in diverse locations: Beverley in East Yorkshire, Ludlow in Shropshire, and Gaywood and Downham Market in Norfolk.

Beverley has thrived since Tesco opened a superstore there in 2002. This was confirmed by a study commissioned by the East Riding of Yorkshire Council. The new store has improved food shopping, improved car parking provision, and kept shoppers in Beverley. Tesco was followed into Beverley by a new Marks & Spencer Simply Food, further increasing the attraction of the town as a place to shop for food. Two-thirds of Tesco shoppers make linked trips to the town centre, where (helped by improving retail trends) the overall vacancy rate has decreased in the last 2-3 years. The report states that:

• "Tesco has…made a positive contribution to the health of the town centre";

• "Tesco reduced leakage of food shopping to Hull"; and

• "Shoppers in Beverley are now extremely well served for grocery shopping"

So in its first year of trading the new store has made a positive contribution to the health of the town centre.

Downham Market has been much stronger in retail and economic terms since the Tesco store opened in March 2001 according to the Economic Development Manager at the Borough of King’s Lynn and West Norfolk. And since the Tesco store opened in Gaywood, about one mile east of King’s Lynn town centre in April 2001, the vacancy rate of shops in the adjoining district centre has fallen significantly and there is now a clearly better range of shops. The results of a new telephone survey confirm significant linked activity with an increased use of shops in the two town centres.

Similar independent research in Ludlow shows how Tesco stores have improved the food shopping offer, reduced the leakage of trade away from the town centres, and improved the reputation of the market towns as shopping destinations.

These benefits were confirmed by Southampton University when they completed a major study of consumer reaction to the transformations currently sweeping through the UK convenience store sector.

Further confirmation comes from a study in 2004 of Alnwick in Northumberland by the Newcastle University Centre for Research in Environmental Appraisal. They found a third of residents from just outside the town travelled away from Alnwick to do their main food shop. And of these, over 60% said they would be more likely to shop in Alnwick if there were a better supermarket. The results were summarised by lead researcher, Dr Neil Powe, who said:

"The results of the survey suggest that providing improved food shopping services will encourage more people to use Alnwick, and that this may increase the patronage of other services."

Raising the bar

Undoubtedly multiple retailers have set a new standard. Their skill in selecting the right range of products, and their ability to offer low prices, meets a consumer need and makes both the High Street and the neighbourhood a more attractive shopping destination. Those retailers that, like the multiples, listen to what their customers want, and respond, will compete successfully with them. Inevitably those who fail to innovate and raise their standards will fall behind. Ultimately it is the consumer who decides which retailers succeed.