As Tesco unveils its new shopping and leisure destination, we look at the changing role of supermarkets and ask if the new Tesco Watford Extra store provides a taste of what’s to come.
Last year Tesco chief executive, Philip Clarke vowed to put the love back into Tesco stores after the retailer issued its first profit warning in 20 years. In the annual report 2012, the supermarket giant announced its plan for ‘building a better Tesco’, which included making its stores better places in which to shop and work, with the pace of new store development moderating, and the pace of refreshing its existing stores stepping up. ‘The future Tesco will demonstrate greater innovation and creativity as we address the needs of consumers around our world – both in store and online,’ said Clarke.
A year on and Tesco has opened a new ‘shopping and leisure’ destination in Watford, Hertfordshire following a huge renovation of its 7,430 sq m Extra store. The redevelopment follows Tesco’s acquisition of restaurant chain Giraffe in March and its investment into other food businesses as part of its strategy to develop the space in some of its larger stores. As well as bringing together a number of new food concepts for the first time, such as Harris + Hoole, Euphorium and The Bakery Project, the Watford Extra store is also being used to trial a new-look general merchandise area focusing on homeware, and cook and dine, as well as a community space, a nail bar and a new F&F concession.
‘The internet has changed what customers are looking for from the stores they visit,’ says Tesco UK managing director, Chris Bush. ‘Now that it’s easy for them to get anything they need delivered to their door, it’s essential that our larger stores are exciting, relevant and convenient destinations. Watford represents a fundamental change in the way people are doing their shopping. More and more of our customers are shopping for leisure; they want to browse for clothes, eat a meal or grab a cup of coffee, as well as do their weekly shop. It offers us a glimpse into what stores of the future might look like.’
Grocery retail in the UK is changing fast, as online shopping continues to rise and consumer habits evolve. With many people now taking a ‘little and often’ approach to their food shopping, larger out-of-town stores must adapt to survive. ‘There’s a move to buying more locally or online and a growing reluctance to travel to larger stores,’ notes Richard Perks, director of retail research at Mintel. ‘Morrisons may be overstating its case to say that the hypermarket is dead, but we could be on the brink of structural changes in the sector as great as the invention of the supermarket 70 years ago.’
Today, some of the biggest challenges for supermarkets are keeping and growing their share of loyalty across a wider customer base, differentiating across an increasingly broad offer of food and non-food, and communicating great prices clearly, while adding in inspiration and expertise, claims Sarah Page, creative director at design consultancy Household. ‘Being more things to more people in a relevant, authentic and intimate way is what’s to play for - both the challenge and the opportunity,’ she says.
Page believes the Tesco Watford Extra store sets the benchmark for future large-scale supermarkets, showing how a large format can diversify and provide more reasons to entice customers to visit, and spend more time browsing, as well as shopping. ‘The store embraces a design experience that influences the customer mindset from a previously grocery routine/list focus across food and non-food into a “discover” focus mindset - inspiring and engaging a broader shopping experience with credible “expert” zones, culminating in a destination store that has everything the customer could need and want across all aspects of their lifestyle,’ she notes. ‘[It] is an example of what large supermarkets can offer the customer that online grocery shopping doesn’t - a destination experience where shopping is engaging, fun, inspiring and underpinned by a leisure mindset.’
Rather than offering a new vision for supermarkets generally, Matthew Corrall of CADA Design Group believes the Watford Extra store presents a glimpse of Tesco’s future personally. ‘When an individual operator has relative parity of price with its direct competitor, one of the few brand differentiators becomes the store experience,’ he says. ‘I feel they have created an energised store environment that leads with fresh produce and offers best in class for each of their departments.’
As consumers move more of their shopping online - particularly large, non-food household products and heavy food items - retailers need to find new ways to fill the gap in-store. In the future, Corrall believes larger format stores, upwards of 2,500 sq m will become little high streets in themselves, providing a diversity of offer and service, including space for community activities.
It’s a thought shared by Nigel Collett, CEO of rpa:group. ‘You could almost say that supermarkets are becoming mini-malls, mixing retail and leisure,’ he says. ‘[Watford Extra] is a good example of a supermarket becoming a mini-mall. Gone is the bland anonymous white cavern filled with endless gondolas of product. Now, there are distinct retail environments and “shops within shops” offering different experiences dependent on the products.’
However, it remains to be seen how far the concept of a supermarket can be stretched, adds Collett. ‘My feeling is that there will always be some things that people will not want to do in store. Beauty for example. Is it really the sort of place you would want to have your hair or nails done? If supermarkets want to raise this an octave or two, they will have to fundamentally change the retail environment.’
Collett believes there will still be a need for large supermarkets in the future so long as they adapt. ‘Just like the high street in general, supermarkets need to engage with the idea that people must have a reason for visiting them.’