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Asda looks for best-value contractors but pledges not to ‘screw’ them on price

Asda wants low-cost construction but will not be “screwing contractors on price” as it gears up to increase its investment in large supermarkets next year.

Executive director for property and multichannel Karen Hubbard told Construction News that Asda wants to hear from new contractors with low-cost building solutions, but that it looks for good value and innovation.

“It is not about screwing contractors for a lower price, because you get what you pay for. We’re looking for genuine innovation and partnerships,” Ms Hubbard said.

The Walmart-owned supermarket pledged its commitment to build more supermarkets and petrol stations when it reported 0.7 per cent sales growth in the second quarter of 2013, down from 1.3 per cent sales growth in the first three months of the year.

“Because the market is changing rapidly and dramatically, what we need [from contractors] is flexibility”

Karen Hubbard, Asda

Ms Hubbard said Asda expects to deliver a bigger pipeline of new stores next year, after a decline in the amount of new space opening this year from an annual average of 500,000 sq ft to 369,000 sq ft in 2013.

Although the pipeline for 2014 had not yet been finalised, she said it would “probably be in excess” of 390,000 sq ft and that Asda would not be scaling back its investment in physical space over the long term.

“There will be more development going forward. We have an okay pipeline for next year, but I would like more,” she said.

Ms Hubbard added that Asda had “slowed down deliberately” this year to evaluate its existing stock and invest more in its multichannel strategy.

“We have had a really good look to make sure the size is right and that every store will generate returns,” she said.

Asda in numbers: 2013

  • £700m invested in new stores and ‘click and collect’
  • 369,000 sq ft of new space added (down from around 600,000 sq ft in 2012)
  • 12 new stores opened
  • 36 supermarkets refurbished

Asda plans to focus its growth on areas where it is underrepresented, including the South of England.

Competitors, including Morrisons, Sainsbury’s and Tesco, are concentrating on expanding in the convenience store market with shops of around 3,000 to 6,000 sq ft in city centres and at transport hubs.

However, most of Asda’s new stores will be larger supermarkets between 6,000 and 12,000 sq ft in size.

Ms Hubbard said: “We would welcome any contractors to come and talk to us about these opportunities.”

Asda has previously awarded work to a range of contractors operating in the retail sector, including Bam Construction, ISG and Longcross, but does not operate a strict framework.

Construction News revealed in March that McLaren Construction had won a £43.5m deal with developer Bericote Properties to build a new Asda centre in Bristol.

Last year Barr won its first contract with the grocer to build a £6.5m superstore in Dundee, Scotland.

“There will be more development going forward. We have an okay pipeline for next year, but I would like more”

Karen Hubbard, Asda

Asked what Asda looks for from contractors, Ms Hubbard said: “First, as we enter more and more smaller stores we would really like contractors who talk about low-cost solutions on new stores.

“Second, because the market is changing rapidly and dramatically, what we need is flexibility.

“We have got to plan 12 months in advance and do not want to be locked in [a contract] if the market changes. We want to work with contractors who can help solve that problem.”

The retail giant will also be launching remote ‘click and collect’ points of around 1,000 sq ft and under over the next year, based within shopping centres, park-and-rides and petrol stations.

Ms Hubbard said it is Asda’s belief that “convenience is more about bringing together clicks and bricks” than opening an arm of high street convenience stores.

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