Two ideas from Sir Terry

Local shops need to benchmark their business on how they can do better than Tesco. Of Fortune Magazine’s top 500 companies the number one company was Wal-Mart which had just under 1 billion square feet of floor space worldwide.

Think of it another way, it is operating 1 million 1,000 sq ft c-stores. This investment in floor space for shoppers shapes the world independent retailers operate in.

Back in the UK, last week Tesco announced it was back to business as usual, with sales up and profits up. Its like-for-like sales uplift was 3.2 per cent, which is a useful benchmark for local shopkeepers to use in assessing whether they are ahead of or behind the market.

But looking forward, it expects to grow sales by adding space. This year Tesco plans to add 181 Express stores, which is 460,000 extra square feet of selling space and will take its estate to 1,310 shops.

Terry Leahy, chief executive, says that the recession is over. Shoppers are “trading up and feeling more confident,” he says. He says that steady trade is good news for Tesco as worried shoppers keep their spend close to home and he’s betting that the value Tesco offers will attract shoppers to his stores.

Analyst Dave McCarthy told the FT that not everything is as rosy as it looks. In a slowing industry, incumbents increase capacity as the only way they can achieve growth.

For local shops, the scale of Tesco’s operations means one thing: more competition. You have to work on the basis that Tesco is going to open across the road from you and benchmark your business on how you can do better than them. It is possible, as plenty of independent shopkeepers have shown. It could even be fun.