Logistics Property Focus on Supermarkets GROCERS’ WAREHOUSE CHALLENGE
Breaking point
Grocers are on the verge of a nervous breakdown. Once they were kings of the world, now they are struggling to make sense of it. SHD Logistics’ property editor David Thame looks at the winners and losers in the UK supermarket business, and how their fortunes affect their warehousing strategy.
August’s silly season fuss over a Morrisons TV advert – criticised for showing children preferring meat to vegetables – shows
how the big supermarkets have lost their once-sure touch.
This confuses the supermarkets. With sales volumes falling, they are wondering where they went wrong. They used to think they were everyone’s friends; suddenly they fear they’ve been misunderstood, and what looked like a warm relationship was really just one-sided. Their business models are under stress. The result is that the UK’s big grocery businesses are in the middle of a nervous breakdown.
As a consequence, their logistics property requirements are chaotic. Some are looking for more, some for less, some just don’t know. A case in point is Sainsbury’s. Last month it fi nally pulled the plug on plans for a 520,000 sq ft warehouse in Exeter. It
16 September 2014
decided that existing distribution warehousing could carry the load. What looked like a vital piece of logistics infrastructure in 2012 turned out to be surplus to requirements in 2014. Meanwhile Morrisons and its online delivery
partner Ocado are pondering a solution to their distribution dilemma. A new 350,000 sq ft RDC in the North West had been expected. Today it seems a much smaller outpost is now being considered. Throughout the grocery business, the impact of online sales is throwing long-cherished and well- thought distribution strategies into doubt. Talking privately to SHD Logistics, one senior surveyor sighed when the subject of supermarket warehouse requirements was raised. “I’ve given up trying to understand,” he said, and went on to list a string of requirements that might be on, might be off, or might be imaginary. This weary baffl ement is common in the property industry, and is shared by surveyors and developers.
www.shdlogistics.com ‘ARMAGEDDON’
For some enlightenment, we turned to Stephen Springham. Springham is a senior retail analyst in the grocery sector, focusing in particular on Asda’s giant US-parent company Walmart. He says to grasp why the supermarket’s logistics property requirements are so diffi cult to read, you need to understand how deep its problems are. “People don’t understand quite how bad things are for the UK grocery business. Sales volumes are going backwards -– we’re just not spending as much -– and whilst values may not be too bad by the end of the year, it’s beginning to look pretty much like Armageddon for the grocery market,” he says.
An enormous strain is being put on supermarkets by competition from the discounters -– especially Aldi and Lidl – combined with extremely expensive online sales and the growth of their convenience >>>
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