May 23, 2016
This post originally featured on Matthew Hopkinson's blog here.
A recent provisional ruling of the Competition and Mergers Authority (CMA) could mean that Ladbrokes and Coral may be forced to close a tenth of their shops in order to prevent a monopoly. The CMA has identified 659 locations where they believe that consumers will be disadvantaged.
The last decade has seen much controversy around types of high street retail
Currently Ladbrokes and Coral have over 4,000 shops between them and on a very even split.
Betting shops are a high street occupier that has generated much controversy over the years but particularly since the recession of 2009. Accusations of targeting the poor, being a social pariah and corrupting communities are just some of the accusations they have faced. That said, it can be argued that they occupy shops that might not be occupied otherwise, they employ people both directly and indirectly and they pay tax. They also bring footfall to the high street which means that surrounding retailers benefit, especially if the Ladbrokes and Corals customers are winning!
2015 was the first year in a long time that saw the number of betting shops overall decline (-80).
The last decade has seen much controversy around types of high street retail as on one hand we want all the shops filled and on the other we say but only if they are what I (the consumer) deems suitable and beneficial.
Pubs, off licences, fast food takeaways (fat tax), tobacconists/e-cigarettes (nicotine tax) and most recently anyone who sells soft drinks and other sugary drinks. Woe betide those who sell both sugar and fat such as the donut retailers! Today's announcement about the billions of pounds in NHS overspend just highlight that these concerns which ultimately link back to health and welfare of the UK population will not subside.
The two images below show the shop locations of Ladbrokes and Coral. Can you guess which map is which fascia?
Map 1 - Coral or Ladbrokes? (source LDC)
Map 2 - Coral or Ladbrokes? (source LDC)
Answer - Map 1 is Ladbrokes and Map 2 is Coral.
So with a combined store estate of 4,000 betting shops and the likelihood of having to close 400 then to what impact and where?
If 400 shops were to close and none of them were reoccupied then we would see a marginal increase in the vacancy rate as it would add 400 to the current 46,345 vacant units, taking the total to 46,745.
A large number of these betting shops lie in above average vacancy locations and the spread of these locations by vacancy rate are seen by the two scatter charts which look at the 200m vacancy rate around each shop along with the number of stores in that 200m radius.
Figure 1. 200m vacancy rates around Coral shops (source LDC)
Figure 2. 200m vacancy rates around Ladbroke shops (source LDC)
The spread of these above average vacancy locations is broad and is shown by the mapping below;
Map 3 - Ladbrokes betting shops in above average vacancy high street locations (source LDC)
Map 4 - Coral betting shops in above average vacancy high street locations (source LDC)
..both Coral and Ladbrokes have 29% of their units in poor health locations
When each fascia is analysed against LDC's Health Index in the main retail destinations, then surprisingly or not, both Coral and Ladbrokes have 29% of their units in poor health locations (i.e.locations with an index score of 3 or less out of 9, with 1 being weak and 9 being strong). 15% of the shops lie in strong locations with an index score of 7 or higher but only 11% of Coral's shops sit in these high scoring locations.
Figure 3. Ladbrokes shops health index scores (source LDC)
19% of Ladbrokes shops have at least one Coral betting shop within 200m of it
The proximity of a Coral betting shop to a Ladbrokes betting shop is an interesting one when one utilises LDC's competitor dashboard. 19% of Ladbrokes shops have at least one Coral betting shop within 200m of it. Of these 2% have two Coral shops within 200m.
Map 5. Number of Coral shops to Ladbrokes shops based on 200m radius (source LDC)
If one adopts a drive time of 20 minutes and reanalyses the density of stores, this increases massively to 90% of Ladbrokes shops having a Coral within a 20 minute drive time.
Map 6. Number of Coral shops to Ladbrokes shops based on 20minute drive time (source LDC)
There are subtle differences between each fascia's portfolio in terms of proximity, health and vacancy
The numbers of shops in this merger is significant which as a result means nearly every town up and down the country is affected by having one or more Corals or Ladbrokes in the town.
There are subtle differences between each fascia's portfolio in terms of proximity, health and vacancy so only time will tell which locations will close should it go ahead, as what I have analysed here misses one fundamental datapoint and that is profitability of the store.
All data and analysis from www.localdatacompany.com