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The supermarket sector

Grocery in the UK is dominated by six supermarket groups, which control 80% of a market worth £110 billion per year. The current takeover battle for Safeway, the UK’s fourth largest chain, with 480 stores and a turnover of almost £10 billion, represents the latest stage in an ongoing rationalisation of a mature market. With food retail comprehensively covered and most opportunities for cost reduction in the supply chain already taken, most chains have diversified into non-food and convenience retailing, triggering investment in the reorganisation of existing stores and the fit-out of a new generation of neighbourhood outlets. Internet retailing represents 2-3% of food retail sales, and although this proportion is expected to increase over the next five years, this service will in most cases continue to run out of existing stores rather than purpose-built warehouses. Accordingly, bricks and mortar will continue to be the main battleground for dominance in UK grocery retail.

Customer focus effects on supermarket design

Customer focus – understanding how and why people shop and their specific needs – is fundamental to supermarket retailing. The design of the supermarket shell and fit-out is increasingly tailored to meet the needs of specific markets and modes of shopping.
The food retail market is mature, with fierce competition on price and quality. Year on year growth in sales is sustained by expanding the overall size of the market. In parallel with this expansion, supermarket retailers such as Sainsburys are using increasingly sophisticated methods to target existing markets and develop new opportunities. For example, food retail has become increasingly focused on families and also on the cash-rich, time-poor younger market that is attracted to high quality, high margin products, such as prepared meals.
Using information on the demographics and income profile of target markets and sales data taken from loyalty cards, retailers have built a clear picture of the different modes of shopping that occur in different types of store. Layouts and interiors can be designed to encourage different shopping trips and additional spending. This approach can be seen in city centre stores which focus on very distinctive convenience and top-up food retail offers and which use clear zoning to communicate the range of products to customers.
One of the key elements of the design of a supermarket development is the retail floor plan, determined by a store’s target markets, which sets out in detail the layout of aisles, gondolas and product. The objective of the plan is to maximise sales. It will determine the ideal routes that customers will adopt in different shopping modes so that the positioning of the departments ensures customer convenience, promotes impulse sales or prevents theft. Along with constraints associated with the site and planning consents, the retail floor plan will determine many of the requirements for the shell and fit out, so it is important that it is finalised as early as possible. Elements of the project affected by the retail plan typically include:

 

• Size and shape of the retail shell, including the perimeter available for product display
• Overall requirement for back-of-house storage
• Requirement for specialist areas, including restaurants
• Extent and location of refrigerated cabinets and roof-mounted refrigeration plant
• Design of gondolas, display units, shelving and display signage
• Requirements for visibility of store contents from outside of the store.

Design drivers

The main design drivers in supermarket retail relate to layout, planning, programme, cost and distribution technologies. To generate greater value from their development programmes, supermarket chains have moved away from the heavy masonry construction that has previously been associated with development in greenfield sites, to make greater use of fast construction methods developed for the distribution industries. Supermarkets are also becoming more deliberate in matching store design to the target market and the needs of local planners.
Layout
Layout design is concerned with the integration of external appearance, internal traffic flows and the organisation of retail products. Externally, the location and visibility of the entrance and its relationship with parking and public transport are very important. In particular, town centre stores with off street parking need careful planning to address the needs of both pedestrian and car-driving customers. As just-in-time logistics become more common, the location, size and operation of the goods yard, which is key to the efficient operation of a store, need to be carefully considered, particularly on constricted sites. Internally, the layout will be driven by the target market, with key issues including the extent of the perimeter available for display, the collocation of preparation and display areas and the positioning of highly serviced elements to utilise shared services.
Planning
Planning policy, affecting supermarkets, aims to direct development towards urban locations and to limit growth in car usage. Planning Policy Guidance notes 6 and 13 have encouraged greater use in town brownfield sites and the growth of town-centre convenience retailing, typically located in developer’s retail shells or as part of a mixed use development.
In the past, planners have had a powerful influence on the appearance of stores encouraging one-off detailing and, in particularly high profile locations, very high quality architect-led designs which can be difficult to extend or adapt. However, in order to make maximum use of the supply chain, to achieve fast construction and to allow for long-term adaptability, supermarkets are adopting a kit of parts approach. This permits flexibility in the specification of external and internal finishes while retaining the benefits of a standardised shell.
Other planning issues that can affect supermarket developments, particularly main stores, include the potential costs of planning gain agreements for community improvements and highway works.
Programme
Speed of construction is very valuable to retailers, contributing to early revenue streams and increasing total turnover. Construction is fast, with contract durations for new build stores of 6000–7000 m² typically ranging from 22 to 26 weeks. Rationalised design and standard products are necessary to achieve such compressed programmes. However, high-level prefabrication of building envelope and services distribution components has not been widely adopted. This is as a result of the simplification of general building components and the variability and low volume of requirements for specialist modules, such as in-store bakeries, which affects the economics of pre-fabrication. Design strategies adopted to simplify and shorten the construction programme include:

 

• Use of local air handling and refrigeration plant to rationalise mechanical services distribution
• Use of cladding systems in lieu of masonry walling. Blockwork lining walls can also be omitted if security requirements permit
• Specification of large bay concrete pours and fibre reinforcement for ground slabs
• Commencement of finishes installations ahead of the completion of a weather tight shell
• Omission of suspended ceilings
• High level services distribution to minimise the need for below-floor ducts and to increase flexibility for re-planning of the store.

Initial and whole life cost
Supermarket clients are concerned about reducing initial build cost but, as owner occupiers, they also take into account the long-term impact of investment decisions. They use payback and life cycle costing assessments to determine additional investment in flexibility, reduced running costs or sustainability.
With large new build, fit-out and refurbishment programmes, any cost reduction that can be achieved across the programme will generate significant total savings. As the development market is very competitive, supermarket projects are heavily value-engineered with all cost centres continually under review. A store’s target market will also influence specification and construction cost, with, for example, the selection of materials for elevations and floor finishes partially determined by location, demographics and projected turnover. In finishes, alternatives to terrazzo floor tiles, including bare screed or vinyl finishes are being considered in areas where wear levels and visual impact are low.
The supply chain is also mobilised to reduce construction costs with standardisation, framework agreements and bulk purchasing arrangements all being used.
Distribution technologies
Distribution is a design driver because of the increasingly wide range of products on sale and due to step changes in the efficiency of store logistics. More efficient distribution driven by automated technologies including mechanical handling and computerised inventory control is enabling the overall proportion of space devoted to storage to be reduced, even though a wider product range, including pharmacy and household appliances, requires more diverse storage. On extension and refurbishment projects, back-of-house space is being rationalised to increase sales area and provide space for new product line preparation areas. However, requirements for efficient operation will usually override the drive for maximum sales floor area. Target figures for total back-of-house space have fallen from 50% of gross internal floor area to 25-40%, depending upon the size and target market of the store.

Design innovation

Design innovation in supermarkets has been mainly driven by cost and programme reduction, although initiatives to increase available floor space and to rationalise sales floor layouts are also common. Areas of innovation adopted by the main building disciplines are as follows:
Structure

 

• Reductions in floor loadings requirements to match British Standards, generating significant savings in design of slabs for storage areas
• Use of supported portal frames in lieu of long span roof trusses. Although the number of internal columns has increased, affecting retail layouts and long-term flexibility, cost savings are significant and, from an architectural perspective, the structure is better suited to store designs which omit sales area ceilings. Typical clear spans of 16-20 m can be achieved with a portal frame, with a spacing between portals of 6-7 m
• Use of lightweight steel and ply construction for upper floors and steel for stairs, to achieve faster construction and reduce dead loads.

Architecture

 

• Introduction of mezzanines Where planning restrictions make it difficult to gain consent for new build stores or extensions, the introduction of mezzanine floors is being considered as a means to increase sales floor area. Mezzanines require a clear height to the underside structure of around 8 m, which can be provided either by building the entire store to the raised level, maximising visibility of the mezzanine, or by raising the roof over the mezzanine level only. Apart from the complexities of retrofitting in existing shells, the main design challenges relate to attracting customers up to the upper level, making use of location, visibility and good quality vertical circulation. The entrance zone is well suited to mezzanine construction, creating a landmark entrance as well as more public space. New build shells are increasingly designed to allow for the retrofitting of mezzanines.
• Omission of suspended ceilings Sales floor ceilings have been omitted in many new stores, reducing dead loads, simplifying onsite activities and saving capital costs. Some extra costs are associated with enhanced finishes to the roof and services, although in general, exposed roof level services require better co-ordination rather than a higher specification to provide an acceptable appearance. A further benefit of the removal of ceilings is the opportunity to introduce natural light via roof flights without complex detailing.
• Rationalisation of supermarket design Chains such as Sainsburys have introduced programmes to simplify store design to maximise the benefits of supply chain integration, and to provide long-term flexibility and adaptability at a minimum cost. Examples of rationalisation involve using standard store models and the wider use of cladding in lieu of solid walls, using profiled metal, terracotta or masonry. Other opportunities include the collocation of staff and customer facilities, which enables the shared use of services installations and allows highly serviced areas to be concentrated in one location, in a two-storey entrance area.

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• Simplified air supply and extract distribution Fabric ductwork can be specified in lieu of galvanized steel on schemes with exposed services. This option has benefits of lower dead loads, simplified installation, an acceptable self-finish and lower capital cost, and is well suited to exposed applications. However, due to requirements for the cleaning of the fabric, maintenance costs of this option are higher than for conventional galvanized steel.
• Decentralisation of main plant and simplification of primary services distribution This could reduce plant room space and simplify site works. However, due to increases in the number of machines and builders’ work, capital and running cost can be higher than a centralised installation. There may also be planning issues associated with roof level plant. This option would only be adopted if these costs were offset by revenue derived from an increased sales floor area or earlier trading.
• Localised high level heating to freezer cabinet aisles using independent warm air jet systems This reduces the need for a central ventilation system and increasing the control of airflows and temperatures within the aisles themselves.
• Revisions to sales area lighting The omission of suspended ceilings has led to an increasing emphasis on feature lighting. General lighting levels in sales areas are typically specified at 800 to 1000 lux. Retailers generally prefer universal levels of lighting across the store, and while there are opportunities to save capital and running costs by concentrating lighting on aisles, this is an option that will take time to be accepted by retailers and customers alike.
• Consideration of heat recovery Supermarkets generate large quantities of waste heat as a by-product of refrigeration and there are opportunities to recycle heat to warm up treated air in preparation and sales areas. However, initial costs are high, particularly when decentralised services are specified and a business case based on whole life cost reduction is difficult to justify.

Procurement

Supermarkets are some of the UK’s biggest clients and with long-term store development programmes, driven by investor expectations for sustained sales growth, the supermarkets are in an ideal position to establish framework and partnering arrangements with consultants and contractors. In determining procurement options, the primary objectives for supermarket clients are:

 

• Overall speed of project delivery
• Certainty of cost and programme
• Minimum capital cost.

Progress towards meeting these and other objectives are commonly monitored by clients using bespoke KPI systems, assessing performance on a project-by-project basis and providing a framework to drive continuous improvement.
Speed of project delivery
The objective of the retailer and contractor is the earliest possible completion to gain additional trading weeks to increase overall turnover. The primary means of achieving early opening are:

 

• Commissioning of specialist designers and contractors, appointed on a framework basis, to ensure fast response times and recycling of project learning in settled teams
• Use of design-and-build procurement to give the project team early control over the programme – enabling work to proceed ahead of the completion of the retail store plan
• Use of two-stage appointments: the first stage is based on agreed fees, preliminaries and overheads and profit; in the second stage the tendered work packages. This creates a balance between speed of appointment and effective price competition on major work packages
• Appointment of specialist subcontractors and suppliers on a framework basis
• Use of standard components to mimimise the impact of long lead-in items on the overall programme and reductions in the extent of on-site fabrication
• Use of standard documentation accessed through extranets or other common platforms
• Simplification of on-site works.

For refurbishment and extension projects, additional objectives of minimal disruption to trading and maximum impact on reopening also apply, and night-time working is the norm. Managing preparatory works outside of peak trading hours with the completion of works during a short shut down period requires very careful programming, well organised supply chains and reliable sources of specialist labour geared-up to out-of-hours working.
Certainty of cost and completion date
Certainty of delivery is very important for supermarket clients, but this requirement has to be combined with the flexibility needed to accommodate changes introduced by retail or property clients at any stage during the development programme.
Design-and-build procurement gives the contractor a high level of control over the process, but is often associated with a reduction in the client’s influence. However, on a framework arrangement, a good understanding of the client’s objectives, a common purpose and effective performance measurement achieve an appropriate balance between flexibility and control. Key drivers behind providing cost and programme certainty include:

 

• Use of guaranteed maximum price contacts
• Widespread use of standard components
• Long-term supply chain relationships with main second tier suppliers, either employed as direct contracts or novated to the project team
• Effective use of change management systems.

Minimum capital cost
Least cost solutions are driven by efficient design, reducing changes in scope and effective mobilisation of the supply chain. Approaches used to deliver least cost solutions include:

 

• Employing specialist designers as part of the contractor’s team
• Second stage tendering of major construction work packages, using specialist contractors on framework agreements, combined with benchmarking of cost, time, quality and performance
• Bulk purchase of components from third tier suppliers, securing low rates and opportunities for long-term value engineering in return for security of turnover. Typical equipment subject to bulk purchase includes air handling units, sprinkler systems, display units and gondolas.

In summary, supermarket clients use procurement to get the best of both worlds, securing low cost construction with a high degree of customer focus. This is achieved with buying power, investment in standardisation and development of long-term working relationships with the supply chain, demonstrating performance improvement year on year.
The extent to which these principles can be applied to other sectors of construction, where workload is more intermittent, is open to question.

Cost breakdown

This cost model features a detailed cost breakdown of a new build supermarket, together with indicative costs of both store extension and refurbishment projects. The costs of the new build store are based on a scheme with a gross internal floor area of 7530 m² including first floor staff accommodation, and a sales floor area of 4645 m². All fit-out costs and costs of external works are detailed, including the costs of a petrol station and kiosk. The store is built to a value engineered specification, featuring a portal frame, profiled metal cladding and a standing seam aluminium roof. The ventilation and refrigeration installations are based on centralised plant. The costs of the extension and refurbishment schemes are based on generic models. The extension model is based on a side extension, without the construction of a new entrance.
Rates in the model are current at second quarter 2003, based on a competitively tendered works packages from framework contractors, at average UK price levels. Project costs are inclusive of preliminaries, and contingencies. Demolitions and site preparation, professional fees, client on-costs and VAT are excluded.
Rates in the model may need to be adjusted to take account of specification, site conditions, procurement route and programme. As most of the rates are based on national framework arrangements, general location factors are not generally applicable to these costs.

Acknowledgements

David Langdon & Everest would like to thank Barry Horrell of Sainsburys Property Company, Malcolm Rae of Sainsburys Procurement and Neil Woodard of Sainsburys Supermarkets for their assistance in the production of this Cost model. Contributions have also been made by Christine Cormack of CHQ Architects, Gary Gabriel Associates, Roberts and Partners, and Richard Taylor of DLE’s Retail Specialist Group.