Focus on Supermarkets Logistics Property
store chains. Springham says some of them just can’t cope.
Morrisons and the Co-Op are the most obvious examples of stress, but they are not alone. Tesco recently dumped its chief executive Philip Clarke after a profi t warning. As SHD Logistics went to press, Tesco shares hit a 10-year low. Morrisons is particularly vulnerable, says Springham. Falling sales and a profi t warning in March have been followed by changes at the top. A new chairman and chief executive will be taking the business back to its roots after a period in which the business has lost a quarter of its value.
“If anyone is going to vanish in the next fi ve to 10 years, it is Morrisons,” he says. He doubts they will vanish altogether, but isn’t betting on it. “They should be wondering how far sales volumes can go down,” he says.
CONSEQUENCES FOR WAREHOUSES
Meanwhile, internet sales are gradually screwing up the supermarket’s business model (see separate box).
Changing shopping patterns mean the supermarkets are abandoning plans to open new stores – and that has consequences for warehouse needs.
For instance, in the last fi ve years, plans for Winners
Not all supermarkets are in crisis. Waitrose and Aldi - operating at different ends of the market - are claiming extra market share. Each now controls around 5% of the UK supermarket scene, a substantial rise since 2008. Aldi has been looking for extra warehouse space in the East Midlands and recently revived its plans for a 498,000 sq ft distribution centre at Cardiff’s Capital Business Park. It had been pondering development on the site since 2005. Waitrose is also investing heavily. Earlier this spring it signed up for a 938,000 sq ft national distribution centre at Magna Park, Milton Keynes in a deal with landlord Gazeley UK. It follows last year’s expansion into a 90,000 sq ft online fulfi lment centre at Croydon and a 360,000 sq ft north west regional depot at Leyland, Lancashire. However, even successful supermarkets aren’t smiling all the time. As SHD Logistics went to press, Waitrose warned of a dip in its £160m operating profi t as it invests to beat the competition.
around 100 new stores have been ditched, most of them by Tesco. If its new 900,000 sq ft Reading depot – opened last year – was based in part on plans for new stores, it could be forced to rethink its supply chain costings. “There’s a lot of head scratching among the grocers. We’re buying less from them, but they fi nd it hard to see the rhyme or reason. Time seems to have caught up with them - they didn’t notice it coming,” says Springham.
Three warehouse decisions – all close by, all taken in the last few months – show how confused the grocery scene is becoming. Morrisons decided to take a modest 95,000 sq ft addition to its existing Willow Green RDC to help serve its growing convenient store network. DHL will operate the facility.
Simultaneously, Sainsbury decided to back away from a long and expensive project to build a new 528,000 sq ft warehouse in Exeter. Its South West network of 35 stores is not expected to grow as fast as it once thought. So the warehouse has been ditched, a year after the grocer said it was rethinking its plans.
Meanwhile Aldi, the thriving discounter, revived its plans for a 498,000 sq ft depot at Cardiff (see separate box). Some grocers are expanding, some choosing not to expand, and others playing a cautious game. Vince Prior, Sainsbury’s head of property investment, said: “As a result of effi ciency improvements elsewhere in our network, we have concluded that there is no longer a requirement for a logistics depot at this location.”
The site will be sold, ready for development,
Online is killing the supermarket
Online grocery is helping to undermine the supermarket’s business model, say experts.
Supermarkets could be losing as much as £14 for each household delivery, says Alex Munro, partner at Knight Frank. Profi ts are minimal or non existent, he says.
“The supermarkets have swapped a low-cost business model for a high-cost business model,” says Planet Retail’s Stephen Springham.
along with an adjoining seven-acre plot at Clyst Honiton. It will form the centrepiece of an intermodal logistics scheme. Speaking to SHD Logistics, a Sainsbury’s spokesman would not be drawn on whether the retailer would simply sell the site or hang around to develop a warehouse for a new occupier. Property sources say this is signifi cant, because the supermarkets need to make as much money as they can from their huge property portfolios. Taking the developers’ profi t - as well as the landlords’ profi t – at Exeter could be very appealing to Sainsbury, they whisper.
The big grocers found the recession tough and are fi nding the recovery much tougher. How much more warehouse space they will need, where, or when, is something even they don’t know.
www.shdlogistics.com
September 2014 17
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