On September 20, 1998 (see below), we reported in newsflash that the British Dept of the Environment had published a study indicating that large foodstores located outside town or commercial centers had cut the market share of principal food retailers by 13% to 50%. The report said that out of town superstores “have had a damaging effect on small towns and district centers…Arguments about clawing back trade and creating jobs simply do not hold water.” British consumers are now going to have to decide whose water they’re going to carry, as Wal-Mart Stores, Inc. has announced that it spent nearly $11 billion to buy up the Asda Group plc, the third largest supermarket chain in the UK, with 229 stores. Asda had sales in 1998 of $13.2 billion, about one-tenth of Wal-Mart’s total sales. Asda brings 78,000 additional employees to Wal-Mart’s labor force. The Wal-Mart offer for Asda forced the British retail chain Kingfisher’s to cut bait from their attempt to buy Asda. Wal-Mart’s offer was 29% higher than Kingfisher’s. The Wal-Mart move into England is the third Euro acquisition by the company, with the first two based in Germany (21 Wertkauf stores and 74 Interspar stores). In terms of units, the Asda offer is nearly 2 and a half times larger than the entire German inventory.”We are delighted to enter the UK market through Asda,” said a Wal-Mart spokesman. Asda’s Chairman called Wal-Mart “the world’s greatest retailer”, and if “great” is defined as the largest financial suitor, Asda is correct. The story of Wal-Mart’s invasion of Great Britain was accompanied by reports that the government is considering easing up on policies that discourage superstores from locating on the edge of town. It appears for now that Asda will retain its corporate logo, but how long will it be before tourists in Britain see the overly familiar red white and blue Wal-Mart logo, or their huge architectural graffitti stores? One industry analyst saw the Wal-Mart beachhead in Europe as bad news for the retail market. “For the industry as a whole, it’s not a bullish situation because Wal-Mart is very price-driven and they tend to take a bite out of the margin wherever they go. There will be a smaller cake of profit to share around and Wal-Mart will have quite a big slice of it”, the analyst told Reuters. The choice is now up to British consumers. Will they remain loyal to Tesco, or Sainsbury, or will they give the Yanks their pound sterling?
The UK Department of Environment study concluded: “When foodstore proposals are disproportionately large compared with the size of the (town) center, the new store can supplant the role of the center.” The study recommended that large superstores be required to produce an economic and traffic evaluation as part of their approval process. In Ireland, a national cap on the size of retail stores was imposed in June of 1998. They don’t want the likes of Wal-Mart eating their retail cake.
