What's gone wrong with supermarkets?

Three things: the first is the internet; second, home delivery which is having a serious impact on the number of in-store customers; and third, the profit per trolley-load of shopping.

The raison d'etre of supermarkets is self-service. By reducing the number of staff required to service each customer, expenditure is reduced and profit increased, an idea that has recently expanded to self-service checkouts. Home delivery on the other hand requires in-store pickers, delivery drivers and a host of components including special trolleys and plastic boxes, somewhat more expensive than getting the customer to DIY.

It is probable that each home delivery is currently costing the supermarket at least £10 and generally this is not recovered by the charge for delivery.

Not only is self-service cheap and convenient for the retailer, it puts a whole range of goods, including the 'added value' version of the chosen item (for example, Tesco's Finest) in the customer's sight line on a shop display. The customer might just buy such when they are in a store; they are much less likely to on a computer screen. One of the reasons the total cost of a weekly shop at Aldi or Lidl is much less than other supermarkets is that customers don't buy these added cost items. They are not available in these stores.

Who's got it right?

Supermarkets are coming back to the town centre, not with the massive out-of-town superstores but with mid-size units, bigger than the corner shop style convenience stores which they are opening on main roads (a store of up to 3,000 square feet enables them to open 6.00 am until 11.00 pm including Sundays).

Aldi and Lidl require units of 6,000 - 8,000 square feet and the big four are looking for similar sized shops in residential areas. There aren't many town centre retail spaces this big, hence Little Waitrose negotiated to move into the Corn Exchange, Tesco are said to be moving into the former Croydon's and Sainsbury's are staying put in Upper Brook Street.

This is obviously good news for the High Street. As more and more comparison goods are sold on-line a multitude of convenience (food) stores provides a better trading environment than coffee shops, pay day loan outlets and betting shops. It could be argued that things are improving; there is now a convenience store on three out of the four corners of St Matthews Street roundabout - a less than ideal trading position - three 'Pound Shops' selling food in Carr Street and by Easter, four multinational convenience stores in the prime shopping area.

John Norman