From City AM:
... [Morrisons supermarkets] is paying the price for its scatter gun approach to buying convenience stores. Last week, it emerged Morrisons is considering a sell-off of its 150-strong M Local estate to a consortium of investors just months after closing 23 shops...
Had it moved into the market earlier and picked stores in better locations at competitive prices, then it could have been better placed today, Jonathan de Mello, head of retail consultancy at Harper Dennis Hobbs, told City A.M.
“The main challenge facing the sector is the fact that it is becoming increasingly crowded, and Tesco, Sainsburys and M&S Simply Food – given first mover advantage – were able to cherry pick the best sites.
"[Morrisons’] desperation to build a critical mass of convenience stores to catch up with the competition led it to over-bid for sites in order to secure them – often with Tesco and Sainsburys only bidding to push up the price as much as possible.
“Average turnover of an M-Local store for example is circa [sic] half the average turnover of Tesco Metro – a function of poor site selection. This issue was compounded by the high rent being paid in order to secure the site – leading to very low or negative margins. Morrisons are right to dispose of their stores at this stage given this, and need to start afresh once they have stabilised their core supermarket business,” de Mello said.
This was also part of the reason for Tesco doing so badly recently. Their success in the 1990s and 2000s was not so much down to their skill as retailers, but the fact that their crack squad of land specialists had snapped up a load of good sites cheaply in the 1990s and stifled the opposition with various planning ruses.
Tesco executives thought "We are opening new stores and profits are going up. Which means we are better at retailing than the others, and that if we keep opening new stores, profits will continue to go up". This was all hubris. Truth of the matter is, they are no better or worse at the actual 'retailing' bit than the rest of the competition and all they were doing was tapping into the hidden profits which they had already secured back in the 1990s when the best locations were cheap.
Debate Magazine
