To the giant Tesco supermarket chain with over 750 stores nationwide, the proposed purchase of 30 petrol stations from WM Morrison may seem a trifling affair but the reaction of the Office of Fair Trading (OFT) is awaited with bated breath in the world of convenience grocery shopping and the entire retail sector.
If the purchase goes through it will take the total number of UK convenience stores under the Tesco fascia to 580 but the deal must be cleared first by the OFT and their decision will indicate whether the guardian of consumer rights has any concerns about the dominance of the supermarket chain which has a share of the grocery market in excess of 30%.
Under normal circumstances a share of more than 25%would merit an automatic referral to the Competition Commission but previously one-stop supermarket shopping has been regarded as a separate market from ‘top-up’ convenience store shopping (refer to www.oft.gov.uk/Business/Mergers+FTA for more details)
Tesco has 6% of this latter market and two previous convenience store acquisitions were not referred to the Competition Commission. However, since then the opposition to the Tesco operation from a wide range of interested parties including farmers, environmentalist, small traders and even the Women’s Institute have increased in volume.
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The dominance of Tesco in the grocery market, the doubling of its profits to £2bn and its increasing expansion into non-grocery merchandise has caused many to reassess the influence of the chain on the general UK retail scene. The distinction between grocery and top-up shopping is increasingly blurred as evidenced by the close proximity of the new Tesco superstore in Hove and the Tesco Express store three blocks away.
In Hove the company has not endeared itself to the local community by its parking policy and its general lack of community involvement and there will be a great many small shopkeepers both locally and nationally that are hoping that the Office of Fair Trading will take a fresh look at the company and refer the acquisition to the Competition Commission.
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