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April 30, 2010

Tesco expansion will threaten small shops survival

Supermarket Tesco's proposed expansion in the wake of record profits is a major threat to small independent shops, the Rural Shops Alliance (RSA) has warned.

The RSA, which represents independent retailers, appealed for "more fairness" in the grocery sector, and urged the Government to bring in new measures to curb the supermarket's expansion.

The Alliance's appeal come shortly after Tesco posted record annual profits of £3.4 billion – a growth of ten per cent on last year's figures. The supermarket chain also recently stated its intention to increase its store development programme by 40 per cent compared with last year.

The RSA's proposals include more rigorous planning laws to prevent big operators "overriding" local opinion and a new Grocery Ombudsman to enforce the Groceries Supply Code of Practice and ensure small firms are able to compete.

RSA chief executive, Ken Parsons, said that the supermarket's colossal buying power was putting the existence of smaller shops at risk, as they were being slowly squeezed out of the marketplace.

"£3.4 billion means you can afford to buy virtually any site in the country to develop a new supermarket," he said. "It means you can employ the most experienced lawyers to make sure you get planning permission. And it means you can allow the new store to run at a loss while it's establishing itself, charging lower prices than smaller local competitors which lack its raw market power."

A spokesperson from Tesco was unavailable for comment.

However, British Retail Consortium spokesman, Richard Dodd, said that the number of independent shops on the high street was increasing six per cent year on year, and that "consumers would decide" whether new local supermarkets would thrive or not.

"The idea that you should prevent customers from having a choice of what's available to them locally is wrong," he said. "People like supermarkets because they provide value, an unequalled range of products and convenience."

Dodd added that creating a Grocery Ombudsman was also unnecessary. "We don't need an ombudsman, which in any case tends to focus on supplier relationships rather than the size of any one player," he said. "It would be a costly bureaucracy that customers would end up paying for through higher-priced products."

According to research last year, £1 in every £3 spent on the high street on groceries is spent at Tesco.