14 Spatial-structural change in food retailing in the UK Leigh Sparks Keywords: food retailing, competition, policy, spatial-structural change, United Kingdom. Introduction This chapter aims to provide an evaluation of the development of the food retailing sector in the UK. It considers the rationale, implications and trajectory of the spatial-structural changes that have occurred. It situates retail businesses within a network of supply and demand chains and emphasizes dimensions of change, power and competition. This analysis then focuses on the implications of recent turbulence in the sector, before refl ecting on future possible directions of change. After the Second World War, the UK underwent a fundamental reconstruction of its food retailing sector. From a position of controlled prices, manufacturer dominance and small counter-service stores, food retailing has been transformed. A rise in retailer power at the expense of manufacturer power has seen retailers take control of the organization of the entire food chain (Marsden and Wrigley, 2006; Clarke et al., 2002; Clarke, 2000 ). At the store level, the end of the twentieth century saw an almost uniformity of approach through the dominance of the large-format, self-service, out-of-town, food store (superstore and hypermarket). Organizationally, an oligarchy with a dominant market leader had emerged (Burt and Sparks, 2003 ). Food retailing in the UK is a major sector of the economy. The Institute of Grocery Distribution (IGD, 2014) valued the retail sales in UK grocery retailing in 2014 at £174.5 billion, with grocery sales accounting for 54.5p of every pound spend in retail in the UK. They estimate that hypermarkets account for 42 per cent of this spend, superstores 20 per cent, convenience stores 21 per cent, discounters 6 per cent and online 4.5 per cent. Tesco is the dominant retailer with around 28 per cent of the market, followed by Sainsbury and Asda with 15–16 per cent each. Table 14.1 attempts a classifi cation of this market in terms of organizational forms, operational forms, store formats and motivation. The dominant form has become the hypermarket and superstore, operated by corporate retailers for profi t. Recently this has been challenged by discount, convenience and internet retailing, but again multiple owned and profi t oriented. This 70-year transformation of the sector has not been uncontested; nor is it concluded. Since 2000, the themes of convenience and of digital shopping (the internet) have emerged strongly. There has also been a rising concern over the provenance of food and food products, driven not least by various food scares (including BSE and horsemeat), the continuing debate over access to (healthy) food for all, and the implications of potential abuses of retailer power in supply chains. There is a small but increasing development of operations that have social and equity motives and are independently operated, which can be locally signifi cant. 99781472456052_pi-325.indd781472456052_pi-325.indd 220000 55/12/2016/12/2016 112:44:522:44:52 PPMM but but ight trade under . urpose of making a ship and not their shmongers, bakers. shmongers, xed or mobile. xed t and reward the owners in proportion to their ownership. in proportion the owners t and reward xed plot of land. xed t the same fascia or name. legal forms of contract exist including franchises. Various their independent ownership. retain shareholdings. profi cation of food retailing in the UK cation of food retailing A classifi t motive a profi is to make The aim of the business liated or operating groups and thus trade under a common name buying that become members Independent businesses of collective Table 14.1 Organizational forms Multiple/corporate m stores Many quoted on the stock market. often as a company A chain of shops trading under common ownership, CooperativeIndependentAffi Operational forms membership. collective is by ownership but As above, the same person or business and operated by A single shop that is owned formats Store Fixed storeFixed Hypermarket A shop that operates on a fi and often ancillary selling food and non-food products services ft selling area, than 50,000 sq. more A large store, Virtual storeMobile store stallMarket A shop that operates on the internet. Superstore vehicle. often by around, A shop that travels Supermarket space – this could be fi A shop in a market storeConvenience Discount storeSpecialist store focusing on immediate shopping needs of consumers. A small store General food store selling food and non-food products. ft selling area, than 25,000 sq. more selling primarily A large store, food. ft selling area, than 10,000 sq. of more A store Motivation at deep discounts to competitors. selling a limited line of products A store Profi selling a range of food products. A small store fi butchers, for example, focusing on a particular A small store line of trade; Equity motive to all. is available and to rewards that fair is to ensure access to products The aim of the business Cooperative motiveCooperative Social motive a surplus is to make and to redistribute The aim of the business this to members on the basis of their member principles is to operate on the basis of some over-riding or belief and not for the sole p The aim of the business 99781472456052_pi-325.indd781472456052_pi-325.indd 220101 55/12/2016/12/2016 112:44:522:44:52 PPMM 202 Leigh Sparks In spatial-structural terms, these changes illustrate a growing challenge to the uniform dominance of the out-of-town superstore/hypermarket. Recent years have seen the rise of smaller discount stores such as Aldi and Lidl. Convenience retailing (local, metro, urban central stores) has become a major growth sector for food retailing. Internet ordering has increased spectacularly, focusing attention on customer collection/delivery of product and causing the emergence of so-called ‘dark stores’, satisfying high-density urban home delivery. There is thus an increasing rethink over the development and sustainability of large format stores. At the same time, local and specialist food retailers have exploited internet and physical opportunities to directly sell their products to consumers via farmers markets, local alternative supply net- works, home delivery and socially oriented supermarkets. Food poverty issues, however, have also brought about a rapid expansion in the number and use of food banks. This changing structure of food retailing has seen changes at sector, organization and store level. Understanding these is vital in comprehending the impacts of food retail sector change on communities, places and individuals. Power and competition in the UK food retail sector The immediate post-war period for the UK economy was a diffi cult one, not least for food retailers who were still struggling with rationing, other controls and constraints and a restricted consumer ability to purchase and consume. The food retailing landscape was one controlled by manufacturers, with food provided to consumers by a plethora of small shops – often inde- pendently or local cooperatively owned – and by local markets. The few multiple retailers of any size operated small-scale premises with counter-service. The contrast with the food retail industry of the early twenty-fi rst century is dramatic. Food retailing today is retailer dominated, with power having shifted from most manu- facturers to retailers (Dobson and Waterson, 1999; Clarke et al., 2002 ). The dominant retail organizational form is the multiple retailer, which account for the vast majority of sales. Independent and cooperative retailing are seen as the exceptions and not the norm. Food retailing is delivered not through the ‘standard’ retail format of the small high street shop, but rather through a combination of the superstore, the modern convenience store and the internet. Place and locality in food retailing is no longer the bedrock of the sector, and the independent shopkeeper is no longer the bastion of the national or local economy. This transformation has a number of dimensions, all associated with the transfer of channel power from the manufacturer to the retailer and the exercise of this power by the retailer to serve the changing needs of consumers. This transformation did not take place overnight, nor did it occur willingly. Retailers and manufacturers fought a number of legal battles over how to service the customer, most notably in the arenas of resale price maintenance, trading stamps, branding and supply chains. From the 1950s onwards, manufacturers increasingly lost the ability to set and maintain retail prices (Mercer, 2014 ). The emergence of aggressive price-cutters led to an increas- ing sense that the retailer, rather than the manufacturer, was the ‘friend’ of the consumer. Consumers, as they became more affl uent, sought to spend this money in diff erent ways, but nonetheless retained a sense of thrift. As retailers increasingly undercut resale prices and price competition increased, so consumers transferred their loyalties to those ‘on their side’. Second, retailers began to compete not only on price alone, but through marketing, including trading stamps, such as Green Shield. While focused on horizontal competition, the approach of using trading stamps further placed consumer attention on the retailer, as opposed to the manufacturer. This also extended, third, into the use of product-branding by the retailers. 99781472456052_pi-325.indd781472456052_pi-325.indd 220202 55/12/2016/12/2016 112:44:522:44:52 PPMM Spatial-structural change in food retailing in the UK 203 By developing generics and other retailer-named or retailer-controlled brand-name products, the retailer began to develop a product relationship with the consumer, eff ectively replacing the manufacturer relationship (Burt, 2000; Burt and Davies, 2010; Burt and Sparks, 2015 ). Finally, retailers also began to take more interest in, and ultimately control of, the supply chain to stores (Sparks, 2010 ).