Asda is launching its first convenience store outside of a gas station.
This is because its new owners are looking for ways to grow the UK’s third largest supermarket chain and surpass Sainsbury’s.
The two Asda Express stores will open before Christmas in Sutton Coldfield, near Birmingham, and Tottenham Hale, North London, with 30 more planned for the year.
Asda stated that it hoped to capitalise on a 13 percent increase in the convenience store market.
This will be increased to £50 billion by 2027 in an attempt to overtake Sainsbury’s as the UK’s second largest grocer.
Sainsbury’s has held the number two spot since 2019, but Kantar analysts estimate that it only holds a 1 percent market share advantage over its smaller rival.
The two have long battled it out for No. 2 despite the UK’s competition watchdog’s three-year ban on their merger.
The decision to open convenience stores in residential areas followed the announcement by Asda’s new owners, EG Group, that they intended to open 200 Asda on the Move locations on their gas forecourts.
The Co-op is selling 132 convenience stores to Asda as well.
Historically, Asda has prioritised big-box stores. When it paid more than £750 million for Netto’s 200 store UK chain in 2010, it made a move into smaller supermarkets, but these establishments were much bigger than the Asda Express stores that were originally planned.
Late entrant Asda will compete against Tesco’s Express and One Stop chains, Sainsbury’s Local, Little Waitrose, and the Co-op in this highly competitive market.
They compete for customers with McColl’s and thousands of independent businesses, many of which operate under the Londis, Spar, and Budgens brands.
Behind Aldi, Morrisons is the fifth-largest supermarket in the UK. As part of this market expansion, Morrisons has been supplying independent businesses under the Morrisons Daily brand.
Following an unsuccessful attempt to manage its own chain of convenience stores, M Local, in 2015. In the meantime, Amazon has tested a number of Fresh stores without checkouts where customers can pay using a phone app.
Gorillas, Getir, and GoPuff, three expedient grocery delivery services, have been cited as major rivals to convenience stores.
However, many have either shut down, fired employees, or sold out to rivals as investors are hesitant to continue funding significant losses.
According to the financial research firm Pitchbook, venture capital investments in quick-service grocery businesses have more than halved this year, from $7.6 billion globally to $3.6 billion.
Shoppers turned to small local stores during the Covid pandemic forming a convenience boom
These outlets have come under pressure as households seek bargains at hypermarkets and discounters.
Mohsin Issa, one of the billionaire brothers who bought Asda with the private equity group TDR Capital two years ago, said: “The launch of our first two Asda Express convenience stores is a landmark moment for our great business and a key step in our journey to bring Asda to more customers in more communities right across the UK.
“The stores have been designed to cater to a broad range of customer needs – whether that’s popping in for a pint of milk, grabbing a spot of lunch on the go or buying the fresh ingredients to cook dinner from scratch. We are confident customers will find everything they need in these stores and enjoy the convenience of having a new type of Asda store on their doorstep.”
Asda claimed that its 3,000 square foot Express stores would stock about 3,000 items, including hot and cold takeout food from its own brands, including Leon. Through Uber Eats, the stores will also provide a quick delivery service.
Source: The Guardian