Following the announcement that the supermarket chain Tesco is to end its contract with the DHL Fastway operation at Daventry; DHL is being forced to close the site with the loss of 150 jobs.
Read MoreCo-op boss Peter Marks says the deal will provide “rocket fuel” for the firm
The Co-operative Group (Co-op), the UK’s fifth largest supermarket chain, has agreed to buy rival Somerfield.
The Co-op said the £1.57bn ($3.1bn) purchase would strengthen its position in the UK retail market.
Manchester-based Co-op, a mutual group run on behalf of its 2.5 million members, also said the deal was done on a cash-free and debt-free basis.
With more than 4,300 UK retail outlets, it employs 85,000 people. Bristol-based Somerfield has about 900 stores.
The latest figures from research firm TNS, show that in the 12 weeks to the middle of June, the Co-op had 4.4% of the UK grocery market, and Somerfield 3.7%.
Stores sell-off?
Somerfield is owned by a consortium that includes private equity firm Apex, Barclays Capital and property magnate Robert Tchenguiz.
They bought the chain for about £1.1bn three years ago.
Somerfield was put up for sale in January and the Co-op first expressed an interest in a possible purchase in April.
The Co-op may now be told by competition watchdogs to sell some of the stores it has purchased, with Morrisons, Waitrose and Iceland touted as potentially interested parties.
Co-op chief executive Peter Marks says Somerfield’s acquisition will provide “rocket fuel” for his group’s growth plans.
Mr Marks said the deal, which is subject to regulatory approval, would “create a stronger fifth player in food and a convenience store chain with unrivalled geographic reach”.
In April, the Co-op said it would spend £1.5bn to revamp its business and lift its fortunes, after 2007 profits fell 46% to £195.5m.
The firm also said then that it aimed to double its profits over the next three years.
It expanded in July 2007 when it merged with fellow mutual United Co-operatives.
‘Big four’
Neil Saunders, consulting director at Verdict Research, told the BBC: “The benefits for the Co-op of this move are that they have a larger scale, and it propels them into a different league in terms of food retailing.
“Unless you have scale in the market, it is hard to compete with the big four grocers.
“Now it can compete more effectively, but it has to be said that the big four will still remain some bit ahead.
“For consumers, it probably means a slightly better standard of store. The Co-op has traditionally been better at that than Somerfield, although Somerfield has put a lot of effort into their stores recently.”
Read MoreTesco is taking on iTunes with a new music and films download service. Tesco Digital will launch next month with more than three million tracks. 1.6 million of those will be compatible with MP3 players straight away.
It plans for the site to be compatible with iPods by the end of the year.
By then it’ll also be offering downloadable films, TV shows and computer games.
Tesco will only say that prices with be “competitive” and prices will vary depending on the album or single tracks.
The chain launched tesco.com in 2000 and was the first major British supermarket to enter the music download market in 2004.
But that service is only available in Windows Media format.
Graham Harris, Tesco’s commercial director, said: “We wanted to create an exciting and easy-to-use entertainment shop that Tesco customers of all ages and technical ability can use and trust.
“We’re starting out with a comprehensive music offering, but customers can expect downloadable TV and films as well as games to buy very soon.
“It really is a case of watch this space.”
As well as food and clothes, the supermarket giant now sells furniture, mobile phones, credit cards, petrol, loans and mortgages.
Tesco confirmed its place as the UK’s largest retailer on Tuesday when it announced last year’s profits were up to more than GBP 2.8bn.
Read MoreSophisticated web offerings from the UK’s grocery retailers are driving the growth of internet retailing in this country, making it the fastest growing online market in Europe, according to a new report from Mintel.
The report found UK online sales were worth euro 18.5bn (GBP 12.8bn) last year, compared with just euro 13bn in Germany, the next largest market.
And the UK was also the fastest growing market with sales up by 75% since 2005.
“The UK has by far and away the most developed online market in Europe,” said Richard Perks, director of retail research at Mintel.
“The main reason for this is the sophisticated online offering of the UK’s food retailers and the fact that so many of us now more than happy to turn to the internet to do our weekly shop.”
Tesco is the largest online food retailer in Europe, says Mintel, with www.tesco.com more than twice the size of its nearest rival (www.ooshop.fr) run by Carrefour.
Meanwhile, the latest figures from IMRG Capgemini showed a record GBP 4.3bn was spent online during February 2008.
Beers, wines and spirits saw a rise of 38%, perhaps in anticipation of the higher alcohol taxes announced in March’s Budget.
Read MoreIn-depth insight into the UK mail order market including detailed profiles of 10 of the leading mail order operators. The report studies market trends, including growth and value in the agency, direct and door-to-door markets and highlights the issues facing mail order retailers with responses necessary for specialists to compete in this challenging sector.
Ten years’ data on market value and growth rates in the overall market, plus five year trends in market segments agency, direct and door-to-door. Market shares of 10 major operators five years’ historical data to 2007, including shares of separate market segments. Key operating statistics for each retailer, including trading record, operating margins and analysis of retail proposition and catalogue portfolio.
In 2007 the GBP 9.9bn mail order market enjoyed its strongest growth for nine years at 6.2pct, reversing four years of decline. This has been driven primarily by direct and niche operators who are targeting specific customer groups effectively, and from new business developments, with the Tesco Direct catalogue the most significant.
The traditional Big Three operators underperformed, losing 1.8 percentage points year-on-year and continued to be unprofitable. Their participation in the agency sector was a factor agency business declined a further 6.1pct in 2007 to GBP 1.4bn, suppressing overall growth and dragging down any gains made in the direct sector (which grew by 10.8pct).
Online has become the most important channel of distribution for mail order retailers, producing GBP 4bn of sales. Online ordering generated nearly 41.0pct of all sales in the GBP 9.9bn market in 2007. The result is that mail order operators have doubled their share of total online expenditure over the past five years, from 19.5pct in 2002 to 38.1pct in 2007.
Identify trends and opportunities in the market using the 10 year historical market data, plus the channel analysis and market shares. Understand the key issues that face mail order specialists enabling you to make well-informed strategic decisions. Seize growth opportunities from the identification of competitive threats and recommended responses.
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