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Can compact retail format design provide an answer to hypermarket and supermarket profitability?

Can compact retail format design provide an answer to hypermarket and supermarket profitability?

Cutting edge supermarket interior design new lifestyle trends marketing and branding

Shopping ever smarter

Consumers are shopping smarter and closer to home, raising the question: has the hypermarket and large supermarket format become irrelevant in certain locations?
Our perspective is that several trends are reshaping large-format food retailing. Hypermarkets are losing ground to smaller proximity formats, which have significantly improved their penetration, sophistication, and value propositions. Convenient shopping models, such as local supermarkets, smart proximity shopping, and click-and-collect services, continue to disrupt the traditional hypermarket and supermarket business models.
Technology is transforming every aspect of food and non-food shopping, making online platforms more accessible and attractive. As a result, traditional large store formats are no longer the economic juggernauts they once were. Hypermarkets need to become dramatically more productive or reduce operational costs significantly. In response, retailers are experimenting with new store design concepts. Multi-format brands like Sainsbury's, Tesco, Carrefour, Albert Heijn, Coles, and Géant are exploring ways to evolve their hypermarket/supermarket models, streamline operations, enhance the customer experience, and penetrate new markets.
Today, the lines between discount and convenience shopping have blurred. Low prices are readily available on the high street, making the out-of-town hypermarket or mall format less attractive. At the same time, online grocery platforms continue to gain momentum globally, delivering a wider range of products and competitive prices straight to consumers' homes, further reducing the need to visit large hypermarkets.
So, what strategies can we infer from these market trends?
Several hypermarket operators are already innovating their formats. For example, Interspar Austria has introduced compact hypermarkets, and Casino Group is revamping its Géant layout and product assortment. Carrefour is rolling out its Planet concept, which re-imagines the hypermarket shopping experience, while Coles Australia has launched a sub-brand with stores half the size of its traditional supermarkets (around 1,500 sqm), tailored to meet the needs of local communities.
Tesco has also embraced the trend, reducing its SKU count from 90,000 to 60,000, which simplified the product offering and led to a 28% increase in annual profits in 2018. This SKU reduction enabled Tesco to cut prices, improve product availability, and shrink the trading area by 30-40%, creating space for sub-tenants. Compact formats offer retailers the opportunity to realign infrastructure costs, reducing the hypermarket footprint to around 4,600-5,600 sqm and supermarkets to 1,500 sqm.
While hypermarkets remain a critical volume channel for consumer packaged goods, the format's future needs clarity. In Europe, market saturation and legislative barriers limit the potential for opening new stores, but there’s still room for growth in emerging markets. The compact format is likely to fuel the next wave of expansion. Despite their smaller footprints, compact hypermarkets and supermarkets are often just as profitable as their larger counterparts.
What are the advantages? Lower operating costs allow retailers to offer lower prices, and proximity to urban areas helps reach new consumers who may not support a full-sized hypermarket or supermarket. This is particularly relevant as smart proximity shopping technology—enabled by geo-location tools, contactless payments, and AI-driven personalized offers—allows local stores to cater to consumer needs more effectively than ever.
The reality is, there is no such thing as a singular "hypermarket shopper" or "convenience store shopper." Retailers must meet their customers across different shopping occasions—whether that’s in a big-box store, a local supermarket, or on their mobile devices. Hypermarkets and supermarkets must give consumers a compelling reason to shop in person by offering a seamless, relevant experience.
At Campbell Rigg, our continuous renewal process allows us to benchmark the best-in-class branding and design across global market sectors. The images in this article are credited to other consultants and serve to illustrate evolving trends.
Take a moment to explore related articles, and don’t hesitate to contact us for a discussion about your supermarket brand, retail interior design, change programs, or digital and social media needs.

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