Tesco Developing New Urban Department Store-Style Format Stores: Will Sell Groceries and Upscale Non-Foods Side-by-Side

On January 7 we wrote about Tesco's latest new retail food store format development, a small-format, no-frills, discount grocery store for its home market in the United Kingdom (UK). (You can read that piece here.) Tesco is currently developing the price-impact, small-format stores in an old warehouse in Britain owned by the chain's founder

Every the busy format innovator, Tesco also is in development of yet another new format: a multi-level town centre (urban-style) department store that would sell food and groceries, consumer electronics, housewares, clothing, jewelry, toys and other non-foods items. The stores would be two-to-three stories in size, with escalators linking the floors, according to a report by the Financial Times. The original source of the information came from a Tesco report on the new store format which was leaked to and published in the British trade publication Property Week.

Tesco already operates large, full-service mass merchandising or hypermart-type stores. However, that store format is too big for most urban locations. The new Tesco department store-style shops would be about 60,000 square feet. The stores would offer fresh foods and grocery products side-by-side with the assortment of non-foods goods mentioned above.

According to the internal paper on the format, Tesco will target Mark's & Spencer, Debenhams, BHS and a couple others who already operate similar format stores.

Many UK retail industry observers are wondering however if Tesco might be going too far. Between all the Tesco supermarkets, hypermarkets, Tesco Extra and Tesco Express format stores--and now the new no-frills, small-format grocery markets in development, and the new department store-style format--the retailer has been opening over the last five years or so, they say what they call "Tesco fatigue" might be setting in with consumers. These observers site the fact that British supermarket chain Wm Morrison beat Tesco considerably in fourth quarter holiday season sales as an example of that possible "Tesco fatigue" on the part of shoppers.

However, other observers say if Tesco does enter this segment of the retail market they will exert serious competitive pressure on its current players. they especially say Tesco will be a major player on London's High Street, where many of the top department store-style format stores are located, including Marks & Spencer's top-grossing store of that format.

You can read the full Financial Times story here.