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Market Commentary

​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Weekly Retail & Leisure News - 22​​ June, 2017​

Grocery market shake-up

Amazon has agreed to buy upmarket food chain Whole Foods Market in a deal worth US$13.7bn (£10.7bn). Whole Foods, which will continue to trade under its own brand, has nine UK stores. Tim Vallance, Head of JLL UK Retail​, commented on the announcement: “This deal is another example of the increasing blurring of lines that is happening between the online and offline retail worlds. Shopping is now becoming seamless: it is about obtaining goods whether online or offline, through clicks or bricks, via multi or omni-channel. It is now simply 'commerce.' In other areas of retail, an element of experience can be thrown in to the mix to attract customers away from their sofas, but grocery shopping has almost always been won through convenience. The deal marks a step up from recent announcements such as the Morrisons fulfilment deal and could set a precedent for other similar deals across the grocery sector.”

The blurring of the lines between offline and online is emphasised by recent research by Mintel, predicting that the UK online food market will grow 12% this year, with sales expected to hit £11.1bn. 14% of consumers now do all their grocery shopping online, while 48% do at least some of their food shopping online, according to the research.

In other grocery news, Tesco has announced its best quarterly performance for seven years, as LFLs rose 2.3% in the 13 weeks to May 27. LFL food sales rose 2.7% YoY, helped by stable shop prices and growth in its fresh food range. Further price reductions and a focus on healthier food also helped Tesco attract 10m more customers during its second quarter, YoY. Tesco’s clothing sales were up 3.7% in the quarter.

And finally in a busy week for the sector, Sainsbury’s is reportedly closing in on a £130m deal to secure convenience chain Nisa, in response to Tesco’s merger with Booker, announced earlier this year. Nisa stores are independently owned retail outlets operated throughout the UK. Owned by 1,400 shopkeeper members who operate 2,500 shops, Nisa calls itself The Family of Independent Grocers. 75% of Nisa’s members must back the deal for a bid to go through.​

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