Hypermarkets under pressure from online retailers

The reign of hypermarkets (grocery supermarket-cum-general department stores) is under threat from a variety of sources and retailers urgently need to adapt and innovate to protect margins, finds Verdict's global arm Datamonitor Retail.
 
A new report, Global Hypermarket Revitalization Strategies, by the independent retail analyst has revealed that although the hypermarket format quickly grew to dominate grocery retailing, emerging consumer trends, along with stricter legislation on hypermarket expansion and heightened competition, are prompting hypermarket retailers to rethink their operations.

This is taking the form of increasingly innovative instore services, further development of complementary online services, and downsized stores, resulting in an entirely new large format grocery store concept.

''One of the reasons for the popularity of hypermarkets in the past has been the ability to offer almost everything under one roof at competitive prices," says Natalia Grabov, analyst at Datamonitor Retail.

According to grabov, consumers' search for value during the recession has resulted in discounters gaining a high level of loyalty, particularly in the markets most affected by the downturn.

"For example in the US, Walmart's Sam's Club has outperformed Walmart itself in terms of comparable store sales. However, online retailers pose one of the biggest threats in the long term as they're able to undercut hypermarket store prices,'' she adds.

While hypermarkets are facing pressure from the online channel across all product lines, non-food is the area of greatest concern, with the internet becoming the most convenient way of buying bulky items such as furniture and electricals.