The Co-operative Group has submitted a planning application to demolish The Cherry Tree Inn in Carter Knowle Avenue, Brincliffe Edge.
The firm was to replace the pub with a shop, despite a campaign to list the building as an asset of community value, or ACV.
Elaine Ramsay owns Knab Farm Shop in nearby Montrose Road, and is also against the Co-op's plans. More than 1,000 locals have signed a petition against the development.
She said: "The Co-op wouldn’t be offering anything that doesn’t already exist and is provided for by the local family-owned shops that are currently there, Rounds News and Knab Farm Shop.
"We already stock a wide selection of fresh and chilled products and locally-baked fresh bread, with Roses The Bakers only a quarter of a mile away - all within walking distance."
Elaine said her shop supported more than a dozen local producers, such as Moss Valley Fine Meats and New Close Farm, as well as Fair Trade and co-operative-made products.
She highlighted the customer service her shop offers, adding: "Only a small business can offer that caring personal touch and bespoke service that a large multi chain can’t."
Elaine said it was a 'shame' the Cherry Tree's owner Enterprise Inns - which said last week the pub could not continue to trade successfully - couldn't get behind the business and 'help it to become a thriving part of the community again'.
She added: "If the Co-op get the go ahead it is more than likely that it will become the only shop in the area. Therefore, rather than enhancing the community's shopping options it will end up restricting them to just one shop."
A spokesman for the Co-op said: "It is our belief that a new store would greatly improve the shopping options for Sheffield residents, providing - for example - a wide selection of fresh and chilled products and in-store bakery, all within walking distance.
"A new store will also create a number of new full and part time jobs, which will be targeted at local residents and offer a variety of skills and training programmes."
If the ACV application is approved, the community would have six months to buy the pub if it were put up for sale.
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