European hypermarket owners have a hypermarket-sized problem: how to restore vitality to their flagging enterprises.¹ Although the giant stores have dominated retailing in many European countries for several decades, the past few years have seen their turnover per square meter drop, their market share growth flatten, and their return on retail assets come under pressure. The extent of the decline in France and Spain—where the format enjoys its greatest dominance, with market shares in food retailing of 48 and 26 percent respectively—is shown in Exhibits 1 and 2.

At the root of the hypermarkets’ predicament is their progressive loss of consumer appeal when compared with other retail formats such as discount stores and supermarkets.² These rival formats are gaining momentum in food retailing, while category killers and other specialist retailers are winning ground in areas such as sports goods and textiles.

Hypermarkets remain formidable, but their period of undisputed dominance is over. To regain their stronghold, they need to translate their structural advantages into tangible benefits for consumers. They must also overcome a growing number of drawbacks, chief among which is the "convenience handicap": the time it can take both to drive to an out-of-town hypermarket and...