Supermarkets in the United Kingdom - Coursework Example

? Supermarkets in United Kingdom (UK) The supermarkets in United Kingdom (UK) are the market leaders inthe retailing industry and they have been successful in attracting a lot of customers to their premises. In the past couple of years, the competition between the supermarkets has stiffened and according to Ball, it is expected that the retail industry will start consolidating at an extensive level. According to Corporate Watch, the supermarkets concept was introduced in the market as a store that allows the customers wide range of selection options for their groceries, foods, beverages and other such accessories and provide them the convenience of doing all their shopping from one single store (2). Although the supermarkets claim to provide a wide range of options for their shopping but the prices that they charge on their products and the pressure given to the suppliers has created certain predicaments in the market. The four giants in the UK supermarket are Tesco, Sainsbury’s, Asda and Morrison. In addition to the planning controls by the government for taking care of the pressures felt by the suppliers in the retail industry, it has restricted the expansion plans of the four giants in the market (Grugulis, Bozkurt and Clegg, 2). Despite the recession happening in the country and decrease in the consumer’s spending, the food and retail industries are showing exponential growth; the main credit goes to the four giants in the supermarket industry who are opening numerous stores at an accelerating rate (Neate, 1). The report by Corporate Commission has indicated that Tesco, Sainsbury’s, Asda and Morrison have been successful in getting permission from the concerned authorities to expand into other areas by opening up new stores. The report also highlighted the threat the expansion of these large supermarkets posed to the convenience stores, local grocery stores and specialty stores. The study of Clerren et al. revealed that the large supermarkets are doing expansion on such an increasing rate so that they can get more market share as compared to their competitors and it is expected that the trend will continue so because of the support that they are receiving by the UK government (470-471). Grocery Market of UK The IGD research has shown that in the past ten years, the grocery market of UK has been growing at an exponential rate and the number of large supermarkets has risen to an exceptionally high figure (Li, 2). In 2008, the grocery market had reached ?146.3bn from ?93.3bn in the year 1998. Afterwards, the market has seen numerous uncertainties in the form of less consumer spending power, high rate of unemployment, financial crisis and many more. As of 2008, the UK grocery store has been divided into four major sectors i.e. convenience store; hypermarket, superstore and supermarkets; online channel and traditional retail. Among all the sectors, the huge market is of hypermarket, superstore and supermarkets and these comprise of more than 73% of the entire sales of the grocery market, followed by convenience stores’ sector that has 21% of the total sales; however, traditional retail faces stiff competition from the aforementioned two sectors and it has declined to 5% (Michaels, 1). According to the Corporate Watch, the four biggest supermarket chains in the UK market comprise of Tesco, Sainsbury’s, Asda and Morrison and they collectively constitute of about 68% of the complete grocery market (3). Tescopoly has shown that the grocery market share can be distributed as the traditional retail stores and supermarket chains; the market share is divided as 30% of Tesco, 15% of Asda, 14% of Sainsbury’s, and Morrison of 10%. Other supermarket chains that are included in UK grocery market are Marks and Spence, Iceland, Waitrose, Whole Foods Market, Aldi, Lidl and many more (Vasquez-Nicholson, 3). Porter has reported that the disclosed sales figure of the four large supermarket chains in the last financial year are as follows, Tesco ?3.8billion, Asda ?803 million, Sainsbury’s ?827 million and Morrison ?874 million. Quick facts about the four large supermarkets of UK The following discussion discusses about certain facts for the four large supermarkets of UK. Tesco In the UK grocery store, Tesco is the market leader and it was the first one to introduce the concept of loyalty card in the market and it has enhanced the marketing system of the store. Currently, the store has more than fourteen million members and it was the first supermarket in UK to initiate the online shopping experience which has received huge appreciation by the market (Michaels, 3). It is among these stores that have the highest number of employees who has created ample job opportunities for the residents of UK and its sales have been increasing at an exceptional rate. According to Corporate Watch, the store has various store format and they are tailored in accordance with the customers’ needs which can be represented in the following table: Source: Corporate Watch, 4 The target market of Tesco stores is middle income people and it has positioned itself as lower priced store that has a competitive agenda. Tesco has been marketing itself to all the UK segments and has been successful in attaining a huge market share. It has even introduced its products under its private label and the sales are increasing at a steady rate of 10%. Asda Asda is the second largest supermarket chain and it was bought by Wal-Mart in July 1999. The store still has the British feel in and preserves its distinct identity as well. The tagline of the store is “Everyday low price”; it gives the store extraordinarily buying power which is driven by three most important elements i.e. price competitiveness, growth in non-food sector and expansion of the stores. Asda does not have any convenience store format; in fact it has four distinctive formats which are classified as supercenters, supermarkets, superstores and Asda Living (Li, 3; Tescopoly, 5). Asda has more than 400 stores across UK and it has separate stores for grocery and clothing and it makes sure that the product ranges of both categories are shown separately so that the customers can find their ideal products. The supermarket chain is mainly targeting the mass market that belongs to the lower-end and it competes on the price. It has been reported by Li that Tesco and Asda are competing on a head-to-head basis and the price competitiveness has been the pricing strategy of these stores for a long time (Cleeren et al., 470). Sainsbury’s Sainsbury was the largest supermarket chain in the country and had been the market leader till mid 1990s but its market share fell drastically to 14% when Tesco and Asda entered the market (Tescopoly, 4). The supermarket has identified growth areas which can be divided into five that comprise of higher number of food ranges that are complementary, increasing customer base via the additional channels, active management of the property, increasing supermarket space and excellent quality of food at exceptionally higher prices (Corporate Watch, 2). As of 2010, the UK leading supermarket chain i.e. Sainsbury’s has more than 850 store which are divided into convenience stores and supermarkets. The store has very limited range of the products that focus on convenient products such as readymade meals and sandwiches alongwith its range of private labelled products (Vasquez-Nicholson, 6). Morrison Tescopoly has reported that Morrison has been run by a family and the annual sales of the store have drastically increased; the main reason for such exponential growth is the best quality customer service which is supported by superb shopping ambience. The main target market of the store is the consumer target that belongs to the middle-lower end. According to Li, the store competes primarily on two aspects that are the price ranges of the products and promotional campaigns offered by the store (4). The distinguishing feature of the store is that it has the “Market Street” feature which means that the owner concentrates on fierce competition by being a food specialist for every customer and it aims to provide fresh food items to the customers so that they feel revitalized and energetic all the time. Impact of the expansion plans of four giant supermarkets of UK The four giant supermarket chains of UK are changing their ways of operations by moving into non-food market so that they are able to increase their market share. In the report submitted by Tescopoly the expansion plans of each of the UK’s supermarket chains can be clearly represented in the following table: Chain Number of stores Space (sq. feet) UK Expansion (sq. feet) Tesco 2482 33 million 2.7 million by March 2011 Asda 374 17.2 million 2 million in 2010 Sainsbury’s 872 17.7 million 1.4 million in 2010 Morrison 425 12 million 1.5 million over 3 years Source: Tescopoly, 4 The survey of the giant supermarket chains has revealed that the need of the expansion is due to the increase demand of the customers for convenience of purchasing the food and non-food items from one place instead of going to various stores for purchasing all the stuff (Ball, 4). One more trend that is depicted by Michaels and Porter is that the mid-sized supermarkets are extending at an increasing rate as these format stores don’t need permission from anyone to open up their store. Implications of supermarkets on UK’s Economy The supermarkets are immensely hampering the lives of the residents living in the country and it is imposing power on the way the citizens are forced to grow, buy and eat the food. The supermarkets are found to be affecting the environment, health of the people and also the interaction that is taking place among various groups. Since people are looking for supermarkets that provide them convenience, ease of access to all the food, non-food and grocery items under one roof and value for their money (Corporate Watch, 4). In today’s dynamic world, supermarkets have eased the lives of people but the expansion plan is not that effective as they are taking advantage of their market power and misguiding the consumers and suppliers. Although the supermarkets’ owners claim to do everything strategically but they are facing intense pressures from the customers and suppliers; hence, the supermarkets need to make sure that they are able to provide the customers with the best range of products that charge reasonable prices. The consumers feel that they are being overcharged despite the promotional offers that these chains claim to offer and they believe that they are being encouraged to eat food items that have diverse impacts on their health in the long-run. Whereas, the suppliers believe that these stores are doing extensive efforts to support the expansion of their private labelled products and that is why they are reducing the product ranges of other brands. Since the food retailing has undergone drastic changes, there is reduction in the number of bakers, grocers, pharmacies and butchers on the high street. The food retail market is being dominated by the large four supermarket chains that are available in the market which claim to provide ample job opportunities. However, the reports by Corporate Watch and Competition Commission revealed that the supermarkets have created high levels of unemployment in the country which has impacted the earning power of numerous consumers. The supermarkets are trying to increase their market share but their ultimate aim is to satisfy the shareholders and business owners. It is believed that the contribution by the large supermarket chains in the economy of UK is minimal and they prefer to work for their own benefits rather than for the whole economy. The main suppliers of the supermarkets are the farmers who have reported that these giants are taking undue advantage of their positions by charging them higher prices and are dictating terms and conditions according to their set of preferences. It has been reported that the farmers are usually paid below their cost of production and are not given sufficient compensation for their services. Hence, the farming industry is undergoing major restructuring and the government is now providing them support so that their standard of living alongwith spending power gets enhanced (Porter, 1). Conclusion The large supermarket chains of UK have been successful in providing convenience to the customers and ease of access to physical in-store and online shopping while providing wide range of selection offers in terms of products, brands and various other items. However, the supermarkets have become narrow minded by focussing only on their benefits and not considering the distortions that they are creating within the country’s economy and environment. It is the responsibility of UK government to make sure that there is healthy competition among various stores in the retail industry. Therefore, UK supermarkets and other retail stores need to oblige with the mandatory rules and regulations regarding the legal and political environment of UK so that the customers and suppliers are given appropriate buying options and are allowed to sell the raw materials in a way that they are compensated for the cost incurred in the production. The large supermarket chains in UK should not take advantage of their position in the market and provide the customers valuable products at right prices and should encourage creation of healthy and a well-balanced lifestyle. Works Cited Ball, Catherine. “Competition in the UK Grocery Retailing Market.” School of Economics and Centre for Competition Policy, University of East Anglia May 2008. Web. 23 June 2012. Cleeren, Kathleen, Verboven, Frank, Dekimpe, Marnik G. and Gielens, Katrijin. “Intra- and Interformat Competition Among Discounters and Supermarkets.” Marketing Science May/June 29.3 (2010): 456-473. Web. 23 June 2012 Competition Commission. “Groceries Market Investigation – Final Report.” Competition Commission 2008. Web. 23 June 2012. Corporate Watch. “Check-out Chuck-out: A DIY guide to stopping supermarket developments.” Corporate Watch. Corporate Watch & Grassroots Action on Food and Farming May 2006: 1-16. Web. 23 June 2012. Grugulis, Irena, Bozkurt, Odul and Clegg, Jeremy. “‘No place to hide’? The realities of leadership in UK supermarkets.” SKOPE Research Paper No. 91 May 2010. Web. 23 June 2012. Li, Emma. “ Supermarket Chains and Grocery Market in the UK.” Student Project No. 008. China Europe International Business School, China 2008. Web. 23 June 2012. Michaels, Lucy. “What’s wrong with supermarkets?” Corporate Watch April 2004. Web. 23 June 2012. Neate, Rupert. “Supermarkets’ plan to build thousands more stores revealed.” The Guardian 21 December 2011 Web. 23 June 2012. Porter, Henry. “Supermarkets have been blighting our land and lives for too long.” The Guardian. The Observer 26 February 2012 Web. 23 June 2012. Tescopoly. “Supermarket Sweep: How retailers manipulate the planning system and what you can do to challenge it?” Tescopoly March 2011. Web. 23 June 2012 Vasquez-Nicholson, Julie. “UK Supermarket Chain Profiles.” GAIN Report 2 February 2011. Web. 23 June 2012. Read More