Newsletter Q1 UK 2018

Newsletter Q1 2018

Small towns feature significantly less shops

130

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100

90

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70

60

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>100,000

40,000 - 100,000

10,000 - 40,000

2,000 - 10,000

<2,000

Note: Breakdown of grocery shops by town sizes (index 100 = 2008). The index operates with five sizes of towns and cities, as defined by Retail Institute Scandinavia based on number of inhabitants. Town sizes are subject to regular revision, i.e. a given town or city may change category according to the number of inhabitants in a given year. Source: Retail Institute Scandinavia

Denmark shows that the population of major cities is expected to grow across a number of age brackets, whereas the population of smaller towns is generally getting older, while population growth turns negative. Consequently, the risk of overcapacity is far more pronounced in the grocery retail markets of smaller towns, entailing a risk of structural vacancy in properties presently or previously occupied by grocery shops. This is also to be viewed in light of the fact that several small towns have a higher number of grocery shops today than deemed sustainable longer term. Due to fierce competition among retail chains, it happens that grocery shops open in towns that in fact cannot absorb them, for the purpose of driving out existing shops within a certain number of years. This makes the sector prone to cannibalisation trends to the detriment of many minor grocery shops and corner shops in particular, but in recent years the more established chains have also been affected. Sadolin & Albæk foresees that the continued pursuit for market share among retail chains will make cannibalisation a key factor in future.

figures cover substantial demographic and geographic differences. Demographics is one of the primary drivers of the market for grocery shops as an increase in the number of inhabitants, all other things being equal, expands the customer and turnover bases of the grocery shops in a given catchment area. Similarly, fluctuating age compositions may cause a shift in an area as the purchasing power of its inhabitants changes over time. Factoring in the urbanisation trend, it becomes clear that the grocery retail sector is thriving in major towns and cities, whereas shops in smaller towns are in dire straits. Measured in terms of overall turnover and sales area, respectively, indications are the same, albeit showing a more favourable trend in towns and cities in the 2,000-10,000 and 10,000-40,000 population brackets. Demographic movements in major cities experiencing population growth therefore support a sustained favourable trend in the number of grocery shops as well as in turnover. As a result, Sadolin & Albæk does not believe the grocery retail markets of major cities to be characterised by overcapacity. In addition, the latest population forecast by Statistics

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