One of the main problems facing them has been the limited assortment discounters (LADs), Aldi and Lidl. After fifteen years of struggles, the LADs finally broke through in 2010/11 and have been driving up their sales and market share ever since. Furthermore consumer habits have changed considerably with the large, out-of-town superstores proving less significant. The Big Four are all facing the same question – what to do with all that space?
Tesco, for example, has been sub-letting space to other retailers. In an unexpected and more radical move, Sainsbury recently made an unsuccessful bid for Home Retail, the UK based home and general merchandise retailer better known for their Argos and Homebase brands. The market has thus far given mixed reviews on the latter and although it is positive to see grocers actively seeking to expand following a sustained period of difficulty, a deal would carry significant risks. Sainsbury would benefit from Argos’ strong eCommerce capabilities but at the same time would be taking on a business that is also struggling in the face of strong competition.
Looking forward, the challenges facing the Big Four will not subside quickly and it is difficult to determine the likelihood of a turnaround. In any case, trading updates from the Christmas period will be closely monitored for signs of progress against the LADs and it will be interesting to see if Sainsbury’s move provokes more radical thinking from its competitors.