The supermarket on the corner of Stockton and Donald streets is becoming a Woolworths with a $13 million development application approved by Port Stephens Council in 2012.

According to a Woolworths spokeswoman the store represents an investment of more than $20 million and will create more than 170 retail and construction jobs.

But with the construction tender yet to be appointed it could be 12 to 16 months before the supermarket reopens, leaving surrounding small businesses struggling for customers.

Nelson Bay Newsagency's Gary Ramponi, vice-president of the Nelson Bay and District Business Association, said it is a matter of short-term pain for long-term gain.

"Long-term having it will make the town a stronger community," Mr Ramponi said. "Short-term it is a disaster."

Business owner Rory Milne from Chemmart Nelson Bay agrees with this sentiment.

"It will have some impact on customer traffic in Nelson Bay," he said. "It is going to be tough trading especially in winter next year. But there will be a longer term benefit, especially after the extension of Yacaaba Street."

A lot of small business people already struggle and need the support of residents to get them through, he said.

Woolworths is "examining several temporary measures to assist the local community" according to their spokeswoman, but there are no concrete plans with customers being encouraged to travel to Salamander Bay to do their shopping.

"It is disgusting," Port Stephens councillor John Nell said.

The councillor has been vocal on the development since it was approved and believes Woolworths has an obligation to look after Nelson Bay, a sentiment shared by mayor Bruce MacKenzie.

"At the end of the day it is good for the town," he said. "But businesses will be doing it tough for a while."

He suggests Woolworths run a shuttle bus to Salamander Bay for shoppers while others are hoping for a "pop-up" grocery store.