Wirral Borough Council refused Sainsbury's application over highway and pedestrian safety concerns, and because it did not comply with national planning policy. "The proposed retail development at this site would not promote the vitality and viability of existing town centres within the borough," council officers said.
The supermarket chain had planned to redevelop a former car showroom in Heswall.
Kerry Garside, manager of the nearby Spar in Irby, said the decision had probably saved the store. "We're made up. A Sainsbury's Local would have affected us big time; we wouldn't have remained open."
A Tesco Express had recently opened in the area, which had depressed sales, "but the two schools across the road are keeping us going," Kerry told C-Store.
She said the council's decision may have been influenced by pressure from residents, a number of whom had signed a petition against the application.
Sainsbury's has the right to appeal within six months of the date of the refusal notice. The appeal would be determined by an independent planning inspector acting on behalf of the secretary of state for communities and local government.
A Sainsbury's spokesman said: "We are disappointed the council refused our application. We are now considering our options."