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Sainsbury’s to fill excess store space with gyms

| International retailers

In an effort to utilise excess space in its stores, Sainsbury’s is reported to be planning to open gyms at three of its larger outlets.

According to The Grocer, the retailer has applied for planning permission to convert 12,000 sq. ft. of its 66,000 sq. ft. Preston Deepdale store into a gym run by an unnamed third party. The report said that Sainsbury’s has already agreed plans to open gyms at its stores in Tamworth and Hinckley in the New Year. 

A Sainsbury’s spokesperson said the move was part of its strategy to make use of 6% of 23m sq. ft. estate that was excess space. The chain already has a number of concession partners, such as Argos and Timpson, that have outlets within its stores. 

Last month, Tesco agreed a tie-up with Sir Philip Green’s fashion group Arcadia to utilise excess space in some of its larger supermarkets. The deal will see Arcadia’s brands, including Dorothy Perkins, Burtons and Evans, feature as concessions in five of Tesco’s biggest stores as part of the pilot scheme. In a separate agreement, Tesco will also provide space for Claire’s Accessories, Sock Shop and Pavers. 

Analysts say such arrangements underline the need for supermarket chains to fill excess space as consumers buy more goods online or at smaller stores. Tesco’s larger out-of-town stores have performed poorly in recent years, with Chief Executive Dave Lewis focused on filling surplus space in these stores with businesses that attract shoppers to the sites. Sports Direct and Mothercare already have outlets in some Tesco stores, whilst other sites have gyms and kids play centres. 

NAM Implications:

  • Ideally, concession partners should pay rent that equates to Sainsbury’s sales of £1,000/sq. ft./annum
  • Assuming an ideal net margin for Sainsbury’s of 5%, the rent should be £200/sq. ft./annum or perhaps a mix of basic rent and  a percentage of sales to ensure good quality concessions
  • Making any additional traffic incremental…
  • Meanwhile, Sainsbury’s have to be in the market for innovative use of spare space by suppliers, bearing in mind that the same KPIs apply…

 

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