Online retail giant Amazon has announced it will buy Whole Foods for £10.7bn.
The deal marks its biggest push into traditional retailing yet, but it’s not just Amazon moving in on the grocery market – other retail giants are in on the action too.
Tesco recently announced its plan to buy Booker – and now Sainsbury’s is also moving into the corner shop market with its proposed purchase of Nisa. So what will these mergers mean for the independent grocery sector?
Tesco merges with Booker
The UK’s largest retailer, Tesco, has agreed to buy wholesale company Booker for £3.7 billion. Booker has around 200 cash-and-carry stores; however what is more significant for the grocery sector is that Booker services 125,000 smaller convenience stores, including those under the umbrellas of Budgens, Londis, Family Shopper and Premier (which total over 5,000 locations between them). This could potentially result in all the grocery shops in an area being either owned or supplied by Tesco.
Shore Capital analyst Clive Black told The Guardian in January that independent retailers could be “up in arms” if the merger goes ahead. And now the news comes that another retail giant is planning to merge with a convenience store: step forward Sainsbury’s and Nisa.
Sainsbury’s to buy Nisa
Sainsbury’s hopes to buy Nisa (a network of 2,500 convenience stores) for £130 million. This is a very different proposal to the Tesco/Booker merger, as Nisa is managed as a collective, with mutual rather than commercial ownership. Any takeover would have to be agreed by a majority of its member retailers.
What would Nisa’s owners get if they agreed to this? An improved supply chain, incredible buying power and access to Sainsbury’s higher-status own brands – plus potentially greater profits. Sainsbury’s gains more small shops, which is crucial given Tesco’s recent activity.
What does this mean for independent grocery businesses?
Naturally, the small businesses that don’t belong to these networks will be feeling apprehensive, as their local rivals suddenly have access to economies of scale and big-brand buying power. Retail analyst John Mercer, interviewed in Retail Gazette, said that the “big four” supermarkets “have spotted the opportunity to consolidate and develop the [convenience] sector”, so the Tesco/Booker merger is just the start of it.
However, the supermarkets' moves into this sector tell us something: convenience stores are seen as a future winner.
As consumers move away from the traditional big weekly shop of old, and towards little-and-often shopping, convenience stores are the way forward.
