The Town that Took On Tesco, and Won

Sheringham's footnote to military history is that the first bomb dropped from a zeppelin landed on the North Norfolk town in 1915. However, the seaside town could command a whole chapter in the chronicles of the supermarket wars: after years of fighting, councillors have overruled their own officials and rejected Tesco's plans for a new store. Instead they approved a local farmer's proposal for a green supermarket.

The East Anglian residents' victory over Britain's biggest retailer has become a rallying call for inhabitants of market towns across the country to halt the supermarkets' advance and the resulting elimination of independent shopkeepers.

Friends of the Earth campaigner Helen Rimmer says: "This is fantastic news for the people of Sheringham who have fought against a new Tesco for nearly 15 years. Tesco controls almost a third of the UK's grocery market and communities up and down the country are fighting back against its takeover of our towns and cities."

Yet despite the revolt at a four-hour council meeting – addressed by a teenage schoolgirl clutching a globe as she pleaded to save the planet – Sheringham residents are divided over Tesco (TSCDY). For every citizen worried that its arrival would see the loss of local traders, another is eager to shop at the store chosen most often in the rest of Britain.

While Trevor Bennett calls it a victory for the small town over the might of a multinational, Jono Read says this is just supermarket snobbery.

Clive Hay-Smith is in no doubt, however. The farmer and businessman is behind the "Greenhouse Project" – an alternative store that Waitrose would manage from autumn 2011 on a site that would include allotments and an academy teaching people about food.

"I didn't want this to be a battle against Tesco, but their behaviour has been appalling," says Mr Hay-Smith. "They are rapacious and relentless. Someone should have a close look at their tactics." When Tesco's previous applications were turned down it sought to build an even bigger store, and it is still contesting the original rejection in the courts. Opponents fear the company will now dispute the planners' latest decision and seek a judicial review of the go-ahead given to the rival scheme.

Tesco's spokesman says the next move is with the council. "The decision is completely at odds with government planning policy," he says. "The council has got to look at whether that decision is legal."

Sheringham is a seaside town with a population of about 7,000 and is still sufficiently unspoiled to attract day visitors. There is a Boots and a Subway sandwich shop but most of its retailers are not national chains. Groceries are bought at Budgens, the Co-op or from the small Sainsbury's (JSAIY) that opened this year – or at the Morrisons (MRWSY) six miles away in Cromer.

Sheringham's chamber of commerce backed Tesco's original plans, however, hoping it would bring trade into the town centre. Chairman Alex Herbert, who owns a bakery and café, says: "We back the council's own figures that say there is a need for a 750sq m store in the centre."

Tesco's proposed building is twice that size, though, and Mr Herbert says: "While we would like a town-centre store to revitalise Sheringham, it's all about size. If a large store comes in it would close everything down. We've got two bakers, two butchers, three greengrocers and two bookshops: everyone would be affected. The effect of a large supermarket on a small market town is to leave it dying."

The evidence of that can be seen in hundreds of towns across Britain. Nationally, one shop in eight is empty, but in some high streets more than 20 per cent are boarded, discouraging shoppers and thus exacerbating the blight. The ubiquitous charity shops move into premises vacated by independent retailers whose sales cannot justify the rates or rent. Niche retailers sometimes survive by selling highly priced specialist groceries but they no longer serve people feeding families on a budget.

The problem concerns politicians and planners as well as the public. Matt Thomson, the director of policy at the Royal Town Planning Institute, who spends his days seeking a solution, describes the effect of Tesco opening in his home town, Princes Risborough, Buckinghamshire.

"The butcher is still trading but the greengrocer went and was replaced by another who went. But other shops, selling clothes or stationery, see Tesco as a saving grace," he says. "Then a Marks & Spencer Simply Food opened, replacing a Budgens, and that has raised the quality across town. It means people do not have to go to Aylesbury or High Wycombe now."

But there are places in Britain with little choice of shops. In 10 towns a single retailer accounts for more than 43 per cent of everything bought, and in Inverness the dominant player has more than half the market. In each case it is Tesco.

The Competition Commission has tried to address such local monopolies by proposing that a competition test be included in planning decisions on new stores or extensions – despite legal objections from Tesco. Plans for stores of more than 1,000sq m could be blocked if the operator had other outlets within a 10-minute drive, but the Government has yet to act and there are doubts over whether such an obstacle would work.

"If they do do it – and that's a big 'if' – it would be quite unenforceable," says Paul Langston, a partner at store locations advisers CACI. "It will mean a legal argument about where they can open a store. It will become a battlefield for lawyers."

Matt Thomson at the town planners' institute is equally sceptical, saying: "We have a problem with society trying to ensure there is competition in a town and that it is not dominated by one supermarket, but we do not think planning is the way to do it. You grant permission for a shop, not for who is going to occupy it."

With a market share nearly as great as Asda's (WMT) and Sainsbury's added together, Tesco has most to lose from controls on new stores, and the Competition Commission can also seek to break monopolies when shops change hands. Co-op's takeover of Somerfield was conditional on it selling overlapping stores to rivals such as Sainsbury's, Waitrose and Morrisons.

That allowed Morrisons, which had previously bought Safeway, to be the fastest growing of the supermarket chains. It bought 38 stores from Co-op and reopened 34 under its own brand last year.

Chairman Sir Ian Gibson, who on Thursday announced a 31 per cent increase in Morrisons' profits, has no plans to stop growing. "In 2007 we set an objective to add an additional million square feet [93,000sq m] of new selling space to our estate over the three years to January 2010," he says. "We have exceeded that target by 400,000 sq ft through a combination of store extensions and 57 net store openings, including the 34 we acquired from the Co-operative Group.

"We expect to add a further 1.5 million sq ft in the three years to January 2013. The organic store opening programme and the Co-op-Somerfield acquisition have given us the next step in our move from national to nationwide."

Morrisons is the dominant supermarket in south-east Scotland, west Yorkshire and mid-Wales but Tesco is market leader across most of Britain. Asda, owned by America's Walmart giant, wins in parts of Lancashire, Yorkshire and the West Midlands while Sainsbury's is top only in areas around Surrey and Gloucestershire.

North Norfolk – like the whole of eastern England – is Tesco country, which is why so many Sheringham residents do not want another branch there. Mr Hay-Smith used to run an education company for Pearson and has already recruited its chief executive, Dame Marjorie Scardino, as a patron for his food academy – even though two Pearson directors sit on the Tesco board.

Mr Hay-Smith celebrated the battle he won on 4 March but concedes the war may not be over. "After three rejections and an unsuccessful appeal you'd think Tesco would have the good grace not to go on," he says. "They're not interested in the community but in grabbing every pound that's around."

Whatever we say, we prefer the retail giants

Who is to blame for the destruction of Britain's high streets? Is it supermarkets desperate for market share? Or the planners who allow their advance? Or is it the public, who, despite their protests, choose the retail giants rather than the high-street independents?

British shoppers are spoilt for choice for groceries. Despite the Competition Commission's long probe into the sector, it had to concede last year that the grocery market is highly competitive. Most people have a choice of supermarkets within a 10-minute drive, but the favourite by far is Tesco. One pound in every eight spent in Britain rings through Tesco's tills.

As supermarkets have grown, the number of independent shops has fallen by 90 per cent over half a century to just 35,000, but that is because, whatever we may say, people prefer supermarkets. They like the security of brands and prepared food, plus the lower pricing, wider choice, longer opening hours and facilities such as parking. And, prompted by advertising, people like to consume what others are having.

Matt Thomson of the Royal Town Planning Institute says: "The nature of high streets and their function has changed a lot over recent years and one of the biggest influences is the internet. People go shopping on the high street socially rather than to buy. They do it for comparisons, so the range of goods on display tends to focus round the most popular products.

"The kind of shops we find on our high streets are a reflection of the way people want to shop and the way we spend our money."

High streets are becoming increasingly leisure-based, with more cafés or other facilities, he points out. "Town centres are important for society," he says. "But they need to change with the times. We have to find a use for them, not end up with a row of boarded-up shops. And sometimes you have to accept the inevitable."