GET ready to slap the change in your back-pocket and shout “that’s Asda Price”: Britain’s number two supermarket has been on a spending spree.
At first glance, the £778m that Asda has shelled out for 193 Netto stores looks pricey. The Wal-Mart subsidiary is paying £504 per square foot, mostly for units that are in the second and third-rate locations where discounters like Lidl and Netto are found.
In 2004, Wm Morrison paid £445 for Safeway’s stores (which were in prime spots), while recent acquisitions among the big four have been brought in anywhere between £250 to £440 per sq ft.
Asda is willing to pay over the odds to cement its number two position. It currently has a 12.8 per cent share of till-roll, but J Sainsbury is snapping at its heels with 12.3 per cent. Netto’s 0.7 per cent share should help it fend off Sainsbury’s for a little while longer.
Making the stores work could be tricky. Averaging 8,000 sq ft each, the units are smaller than a small supermarket (15,000-20,000) but bigger than a traditional convenience store (3,000 sq ft).
Still, with the backing of Wal-Mart it can afford to make some mistakes along the way. And taken alongside plans to build an extra 55 small supermarkets over the next three years, this deal will significantly increase its presence.
Nor is bigger necessarily better. As the Tesco Express juggernaut has shown, shops with less square footage can be extremely profitable.
Small, it would seem, is still beautiful.