Retail Industry of the United Kingdom - Essay Example

UK Retail Industry Introduction UK boasts of a diverse, competitive and innovative retail sector that has proved strong even during harsh economic times. The retail sector has played a very important role in the economy by providing employment and selling goods and services to people who want them. In 2012, the sector attracted a turnover of 10 billion pounds. This is therefore an important sector that is worth analyzing the performance and trend. The purpose of this paper is to analyze the performance of the retail industry in UK over the Christmas period of 2013. This analysis will be important in determining the factors that influence the performance of the industry. The analysis will be important for the players within the industry to make an analysis of their strengths, weaknesses, opportunities and threats that may face them. This will be important in making investments strategies and in developing strategies that will ensure survival and improved performance. Background context: UK retail industry recorded improvements in performance in December 2013. Data from the office of national Statistics show that sales within the period increased by 5.3% compared with that of 2012. The increase in sales throughout the year 2013 compared to 2012 was 1.6%. Sales recorded in December 2013 therefore increased with a larger proportion that the rest of the period. Health, clothing and beauty recorded strong performance whereas other nonfood posted the strongest performance in growth during the period. Online sales in non-food products also increased by 19.2% compared with the sales recorded in 2012. Factors contributing to the overall success in UK retail industry The increase in the level of sales in the retail industry in UK in December 2013 is in all respects considered a success. Increased sales implies a growth in the companies’ turnover and increment in the profits. The good performance posted in this period can be attributed to the following factors: First the success in performance can be attributed to the improvement in economic performance realized. The stable and improved economic conditions resulted in the rise in the households’ disposable income. With the increase in disposable income, the level of spending increased with the majority being directed to the retail industry. Secondly, the increased sales recorded within the period as compared to other periods within the year was as a result of the Christmas festivals. Christmas period is considered a season of celebrations and is thus associated with the giving’s of gifts and other presents to the loved ones. Most of the gifts given are retail products e.g. cloths, food products and other households consumables (“Retail Sales” December 2013). This thus translated in additional sales. Furthermore, it is during the December period that most families go for their holidays hence increased expenditure on retail products. In addition, the period was characterized by increased disposable income as most companies pay their employee bonus. Bonus payments increases the disposable income that simultaneously translates in increased spending. Moreover, many companies close for their annual breaks within this season making households available for other activities including going for shopping and other get together events. Better performance posted in December 2013 can also be attributed to the new channels for marketing e.g. m-commerce, and e-commerce that have tremendously grown in popularity. Many consumers have therefore preferred home delivery and online purchases leading to the increase in online trading (“Retail Sales” December 2013). The increase in ease in making online purchases and personalized deliveries as well increases the sales level. Tesco The first company in the retail industry is Tesco. Tesco has been ranked the second largest retail in the world based on revenue and profit. Despite the increase performance in the industry in December, Tesco recorded a decline in performance with the reduction being attributed to the long term strategy of the company. The company is in the revamp stage and has a long term strategy of increasing their revenues and market share (Tesco 2014). The decline in performance has also been linked to the failure by the retailer to cut prices hence losing their market share to the competitors. The company’s vision is to be the highly valued business by the customers they serve, the communities it operates in, to be loyal and committed to the colleagues and to be valued by the shareholders. The company has the vision of looking at the welfare of its stakeholders. The company has a strategy to grow in the UK core, be outstanding international retailer, grow retail services in the markets they serve and be responsible to the communities they serve among others. The company has about 530,000 employees with a market share of about 28.7% compared to 29.6% in 2012, the declining share being attributed to increased competition (Tesco 2014). The company sells groceries and general merchandise in different countries. The company’s size and international coverage gives it an edge over competitors. Further, Tesco sells a wide variety of products and services which ensures high sales and increased profitability. The weaknesses of the company lies with the failure to respond to market demands by cutting price. On the other hand Tesco has an opportunity to increase their sales in the ever growing consumer market and to take advantage of advancement in technology to market their products and reduce cost of doing business. In terms of threat the company is faced with stiff competition from new entrants and increasing competition from existing competitors i.e. Morrison’s. Sainsbury’s This is the second largest retailer in the UK with a market share of about 17.8%. The company offers a wide range of products which include groceries, phone shops, technology steals, and furniture clearance among many more. The company vision is to be the most trusted retailer where people love to work for and shop. The company recorded a small increase in sales in December with the firm acknowledging that the seven days before Christmas being termed as the busiest ever with more than 28 million transactions. The increase in sales was majorly in the company’s brands as well as the late rush for Christmas purchases. Some of the strengths of the company include the convenient stores which resulted in sales growth by about 18%, the wide variety of products sold and the strong financial results that saw the company move back to the second largest retailer. The company weaknesses lays in the inability to quickly respond to customers changing needs. Sainsbury has an opportunity to enter into new markets and introduce additional products to boost its sales. Finally, the company faces a threat in reduction in market share from other competitors like Waitrose, John Lewis and next which have experienced increasing market share and performance. Next Plc Next is a multinational retailer of cloths, footwear and retailer products with its headquarter in Enderby. The company recorded a significant increase in sales in December 2013, recording 11.9% rise in the 8 weeks preceding Christmas. The company high sales were majorly boosted by the festive season and intensified marketing strategies that were adopted by the business during the period. The company strength can be attributed to the focus on clothing and footwear as their major products. The company has opportunities of expanding their product portfolio to cover other retail products. The small market share of the company possess a challenge of ensuring better service delivery to all their customers. Finally, Next Plc faces the threat of stiff competition from new entrants. John Lewis John Lewis just like Next Plc, recorded an increase of 1.2% in their sales during the 2013 December period with a significant soaring in online sales. The company attributed the strong sales to the increasing popularity, of its click and collect service that enables the customers to purchase products online but pick up the products in their stores (John Lewis 2014). The location of their stores especially those close to the city centres also led to the significant rise in the sales recorded in the period (“Lewis reports” 2014). The company is majorly known for its sales of tablets, coffee machines, computers and Christmas lights. John Lewis strength lies in its popularity with sale of electronic products together with the strategic location of their scores. The company has an opportunity to increase the number of retail products it sells to ensure they diversify the risks of depending on few revenue streams. The major threat that faces the business is the fast changing nature of technologies that results in faster change in consumers’ selection. Competition from other competitors further poses a threat to the business. Conclusion The retail industry in UK remains one of the highly competitive industry with several players. With the stiff competition and changing customers’ needs and preferences, the players in this industry are faced with the challenge of developing working strategies to ensure they cut for themselves a market niche. The companies in this industry must also continuously and meticulously scan their environment to aid in developing viable strategies and increase their sales. The changing trends in customers like home delivery, online purchases and online marketing methods have revolutionized the manner of operation in the industry and will continue to determine the future ways of doing businesses. To survive the competition, the companies in the industries must remain innovative in the marketing strategies and develop new service lines. The industry still remains fertile with the growing population and stabilizing economic conditions. Finally, players in this industry must also endeavor to assess the impact of different seasons on the demand of their products. References John Lewis reports healthy sales. (n.d.). BBC News. Retrieved April 29, 2014, from http://www.bbc.com/news/business-25573462 John Lewis | iPads, TVs, Furniture, Fashion & More. (n.d.). John Lewis. Retrieved April 29, 2014, from http://www.johnlewis.com/ Release: Retail Sales, December 2013. (n.d.). Retail Sales, December 2013. Retrieved April 29, 2014, from http://www.ons.gov.uk/ons/rel/rsi/retail-sales/december-2013/index.html Statistical bulletin: Retail Sales, December 2013. (n.d.). Retail Sales, December 2013. Retrieved April 29, 2014, from http://www.ons.gov.uk/ons/rel/rsi/retail-sales/december-2013/stb-rsi-december-2013.html Tesco.com - online shopping; bringing the supermarket to you - Every little helps. (n.d.). Tesco.com - online shopping; bringing the supermarket to you - Every little helps. Retrieved April 29, 2014, from http://www.tesco.com/ Read More