Small retailers revolt over the 'Tesco-isation' of the high street

You pause, thinking back to when your nearest organic butcher and greengrocer would have provided all the inspiration and ingredients you needed, remembering ruefully the day they shut down. In fact, most of the shops nearby have closed down. These days the high street is all mini-casinos and European-style cafés. You sigh as you set off, in your car - of course - to your nearest Tesco.

If this is what shopping in Britain is destined to be like in 2015 then Jim Dowd, the Labour MP for Lewisham, wants to know. He is chairing an inquiry into the retail sector by an all-party group of MPs to determine whether the latest bout of supermarket sweep being played out by Tesco and Sainsbury's is bad news for consumers.

The 74-strong group of MPs has quizzed scores of interested groups, from Tesco to the Women's Institute, on their vision of what a shopping trip in Britain in 10 years' time might comprise. It plans to present its findings to Alan Johnson, the Secretary of State for Trade and Industry, in December.

Yesterday was the turn of small shopkeepers to fight their cause against what Mr Dowd has dubbed the "creeping centralisation" by retailers such as Tesco of the UK's high streets, in the first of four hearings. The big boys, who have decided the booming convenience stores sector provides easy pickings, are due to put their side of the story next week, along with the British Retail Consortium and the British Chambers of Commerce.

David Rae, the chairman of the Association of Convenience Stores (ACS), painted a picture of communities with their hearts ripped out if the Government continues to ignore the plight of local stores in favour of the Big Four (Tesco, Asda, J Sainsbury and Wm Morrison). "The Office of Fair Trading is content that competition means competition between the four major grocers in any one area," he told the hearing.

Steve Parfett, who runs the Landmark group of wholesalers, labelled the Big Four a "cartel" for the way they have free rein to carve up the grocery market between themselves. His members are worried they will have no shops to serve if small convenience stores continue to close at the current rate of 2,000 a year.

Bob Russell, a Liberal Democrat on the All-Party Small Shops Group, likened the high street to the Premier League. "There are lots of teams but only the top four compete," he said.

Calling for policies to promote "greater fairness" in the grocery marketplace, the ACS asked the committee to recommend a ban on below-cost selling. As Ian Proudfoot, who runs the North Yorkshire-based, five-strong Proudfoot chain of supermarkets, argued in his submission, small shopkeepers cannot fight below-cost selling. This is when big groups - Tesco in his case - use their buying power to offer significant discounts in specific areas to promote a new store.

Early last year, Tesco offered £8 money-off vouchers for every £20 spent in their new Withernsea store near Hull - a 40 per cent discount across a range of products. "Whereas we used to be a thriving part of the high street, we are now a marginal business," Mr Proudfoot said. "My predicament is caused directly by Tesco using their scale - something I am unable to match - directly against me."

Professor Alan Hallsworth, an expert in retail management, at the University of Surrey, who is due to give evidence next week, said: "My concern is whether you should use your buying power in one sector - the supermarket sector - to give low prices in another sector - the convenience sector." The big groups source directly from overseas, rather than rely on local wholesalers, and so they can charge customers less for products than a smaller rival pays a wholesaler to stock them.

But Professor Hallsworth is worried that the inquiry is too little, too late. "The horse may have bolted. There was a lot of diversity 25 years ago but a lot of names on the high street have already disappeared." A recent survey by the New Economic Foundation, an independent think-tank, found almost half of UK high streets have been "cloned" by a handful of retailers.

For evidence, MPs need look no further than across the road at the Tesco Express that has replaced Cullens above Westminster Tube station. Tesco's acquisition two years ago of Adminstores, the owner of Cullens and Europa, increased its presence dramatically in central and west London, making it impossible to avoid the chain in certain well-heeled areas.

Tesco's salvation, as a spokeswoman reiterated yesterday, is that competition authorities are happy to regard the grocery sector as two distinct markets: for "one-stop" and "top-up" shopping. This means that although on some measures it has more than a 30 per cent share of the grocery market, it has "just 6 per cent of the convenience sector". She added: "Previous competition inquiries have found the market is fiercely competitive."

Mr Rae wants the all-party group to recommend the introduction of incentives to encourage budding retailers starting out, such as a flat tax rate for the first year. He also wants greater assistance for retailers that wind up as the sole remaining shop in an area. The ACS recently stepped up its fight against the major supermarket groups, taking their case to the Competition Appeal Tribunal after failing to convince the Office of Fair Trading to investigate the grocery market.

The Federation of Small Businesses, which put its case at yesterday's hearing, wants the Government to re-examine supermarket trading practices. Although a recent OFT investigation concluded the existing code of conduct that governs relationships between suppliers and supermarkets works perfectly, few industry insiders believe this to be so. John Murphy, the chief executive of the Federation of Wholesale Distributors, said: "The word in the trade is it's a joke. It has no teeth."

But high streets have more to worry about than supermarkets. The proliferation of retail estates and edge-of-town shopping centres is also luring shoppers from their old stomping grounds. Nick Bubb, a retail analyst at Evolution Beeson Gregory, said: "Consumers want the ease of car parking that you get from out-of-town shopping centres." He said the new Westwood Cross centre in Thanet, Kent, will render Margate's high street pretty much obsolete. Add in the growing internet threat and you begin to understand why, according to the IGD, an industry think-tank, the number of independent convenience stores has fallen 11 per cent since 2000.

While Mr Dowd's all-party group is bound to generate uncomfortable headlines for Tesco and its ilk, ultimately it has no sway over government policy. And as shopkeepers in Gerrards Cross, Buckinghamshire, who have lobbied hard against the opening of a controversial new Tescoin the heart of the town, know all too well, uncomfortable headlines are not enough to stop the supermarket giant from putting their stores out of business by 2015.

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