The UK food retail ‘race for space’ and market saturation: a contemporary review

Abstract

This conceptual review paper explores food retail space saturation in the UK in the light of an apparent recent peak of store space growth, an inferred decline of the hypermarket format, and, in particular, the stagnation and subsequent deterioration in performance of the UK market leader, Tesco. Despite saturation being widely discussed by retail executives and analysts, the last significant academic work in this area occurred in the mid-1990s. In this paper, we develop an understanding of retail saturation that rests on a spatial conceptualization of retail development at a local catchment level and rationalize why, and in what ways, saturation manifests itself through sales impacts and cannibalization. In the process, we analyse the differing local effects of new store openings, store extensions and format innovation to illustrate how saturation is contingent on local catchment conditions, competitive interactions and the particular geography of retail brands and formats. Although a significant slowdown in new store construction may be a logical response at the level of the industry, this may not necessarily be the case for individual retail firms.

Keywords::

• retail saturation
• store format
• food retailing
• location planning
• retail geography

Acknowledgements

We are grateful to Jonathan Reynolds, Andrew Alexander and Alan Hallsworth for comments of earlier drafts of this paper. We also appreciate the helpful feedback of two anonymous referees for the EAERCD 2013 conference and a further two referees for this journal. As always, all errors, where they exist, remain our own.

Notes

^2. We acknowledge that the data concerning retail space growth originating from CB Richard Ellis that is presented early in this paper itself fails to provide a net retail space growth figure. However, it is instructive in so far as it underlines the scale of investment in store estates over recent years.

^3. Cadwallader (1975) makes the distinction between actual measured distance and the consumer's cognitive distance (‘a measure of how far an individual thinks two places are apart’, p. 340) in partly governing consumer behaviour.

^4. In other words, 40% of all sales available at this location are captured by the store.