Last month’s preliminary Competition Commission (CC) report into the supply of groceries in the UK contained serious flaws and omissions, which reflect an ignorance of a range of hidden elements affecting trading in town and city centres.
It even encouraged the development of more edge-of and out-of-town stores in areas that may already be saturated with superstores and hypermarkets. While retail bakers may have been dismayed by the findings, one question remained unposed: why are independent French bakers thriving in spite of excessive competition from out-of-town hypermarkets, while their UK counterparts are not?
Over the past 37 years, marketing, management and economic consultant MPC has conducted market research into out-of-town shopping in France and the UK. Independents face huge competition from hypermarkets and superstores in French cities such as Toulouse, Nancy and Evreux. In fact, town-centre trade has dropped in these places from anywhere between 13% and 27% for small supermarkets and convenience stores. In spite of this, we have found that bakers and other specialist food retailers have not been affected. In fact, the majority are thriving.
Why is this? In the past, French bakers had an advantage over their UK counterparts as government set minimum prices for bakery goods, a system no longer in place. But our research found the reason for their success is the French do bakery retailing well. The quality of flours and other ingredients used, the care taken over presentation and the standards of hygiene are, on the whole, exemplary.
This enables relatively small outfits to compete against high-quality hypermarket and superstore bakeries. The type of locations in town centres plays a part, but this is not as crucial with a bakery as with other retail outlets - the smell of baked bread wafting down high streets tends to extend catchment areas.
taking the fight to the enemy’s doorstep
Indeed, it has been shown that French independent bakery outlets can succeed despite being located in the jaws of a French out-of-town hypermarket commercial centre. This is defined as 80-100,000sq ft of selling area with 40 checkouts and 10-20 small independent shops running adjacent to the mall outside the main store.
Toulouse has always been regarded as having more out-of-town retail competition than any other city in Europe. There, we asked a bakery why it chose to trade on such a competitive site. The answer was that the ingredients of the tarte aux pommes in the hypermarket were entirely different from the quality of its own flour and other ingredients.
MPC also researched the competitive effect on town-centre trade in Nancy (population at the time, 1973, 130,000) after three out-of-town hypermarkets with a total selling area of 160,000sq ft opened in the space of two years. Contrary to what many local chambers of trade might expect, independent bakery and specialist food traders within the town centre were not seriously affected.
While our research findings in Nancy and Toulouse might appear dated (they were conducted in 1973 and 1994 respectively), the premise of the research holds good, as what we saw there shows the same pattern of competition that we see in the UK now. Indeed, this research could only now take place in a UK town or city that had no hypermarkets or superstores - and thus competition could be assessed through new openings.
So, while UK bakery retailers should be able to thrive under the same conditions, many compare poorly with the French. So too do farmers’ markets, which still have much to learn, particularly with regards to hygiene and presentation. It is apparent that the French public are better informed about the quality of the food they eat than their UK counterparts.
But the CC report appears to encourage more hyper-markets and superstores in already saturated areas, and this could harm town-centre bakery trade. MPC is now analysing 1,800 towns and cities in the UK with populations in excess of 4,000; latest research shows that saturation levels from hypermarket and superstore openings are now well in excess of those in Toulouse.
For example Hereford, population 56,000, has four outlets that fit MPC’s hypermarket definition (see [http://www.tinyurl.com/yrwsve]), each with ample parking/selling areas. All four are within six minutes’ driving time from the centre and within 12 minutes’ driving time of each other. The ratio of saturation here is 32% higher than in Toulouse.
drowning, not waving
Worryingly, the CC appears unaware of a host of hidden commercial factors around out-of-town trading. There is no appreciation or admission that saturation levels have already been reached in a number of areas across the UK. There is no mention of free car-parking at supermarkets or, indeed, the effects on traffic congestion and carbon emissions caused by opening new stores in already saturated areas. Worse still, the CC report does not even provide a definition for hypermarkets, superstores and supermarkets.
It can be overlooked that 27% of households don’t own a car and that many people find town centres more convenient. Then there are households without a car in villages (9%) and town-fringe areas (19%). For them it is vitally important to retain small local stores. This point was ignored by the CC.
There is hope for the many town-centre bakeries - providing they take up the challenge of improved quality, presentation and location - of emulating their French counterparts in succeeding in the face of hypermarket competition.
It is crucial that the public understand the issues, but these same issues should be made apparent to local authority planning departments. It is not sur-prising that so many planning approvals have been given for edge-of or out-of-town developments in town centres where saturation levels have already been exceeded. Usually the planners have been blamed, but clearly they need to be educated.
Sanity must prevail to ensure that, in future, all towns and cities that have reached hypermarket and superstore saturation levels are protected from further edge-of or out-of-town development. There really could be a great future for UK bakery retailers - provided these lessons are learned. n
=== High street woes ===
A new report this week from The British Shops and Stores Association, which asked shoppers about spending habits, found that:
73% thought high streets are "a vital part of a healthy society";
42% believed their local high street had declined in quality over the past five years, citing a lack of variety, rising vandalism and a glut of charity shops;
52% said they would shop more locally If there were a greater variety of stores.
Over 300 of the 4,500-strong small stores that make up the BSSA’s membership have closed in the past year. A Federation of Small Businesses’ survey of Scottish food shops also revealed that, since 1998, one in six bakery shops had been forced out of business.