The Retail Industry in the UK - Coursework Example

Report for a UK Retailer Contents Introduction 3 Discussion 3 Key relevant changes in this sector 3 Suggests strategies and tactics to be used 8 Conclusion 9 References 10 Introduction The following report deals with the retail industry in UK. The retail industry like all other business sectors in the world is experiencing rapid changes and growth. These changes in the business environment are also affecting the retail industry. What this means is that the players in the retail industry have to change along with the changes sweeping in the industry in order to stay relevant. The following report first states the broad changes that is sweeping through the retail industry in UK and focuses on the strategies that should be adopted by the TESCO to be successful in the market scenario. Discussion Key relevant changes in this sector The retail sector in the UK has always been very competitive. It evolves very fast and responds to the wants and needs of the customers as it changes over time. The traditional model was based on high street and local parades. This began to change with the introduction of in-town shopping malls. The in-town shopping malls were introduced in the 1960s and 1970s (Sulliva and Adcock, 2002). The market further changed with the introduction of out of the town shopping centres, hyper market, retail parks etc. All these cumulatively further changed and transformed the market place. The retail market space is further witnessing a sea change with the introduction of e- commerce and m-commerce and these channels have rapidly grown in popularity over the years. The growth of these channels of marketing and market place has been facilitated by the growth of internet access and broadband services. This has also resulted in the facts that the home delivery system has increased phenomenally and the customer foot fall in the stores have reduced greatly. Changes have also been driven with the advances in products like facility of digitally downloading contents ranging from books to computer games. Retailers across UK have come to recognize and appreciate the fact that they no longer need to have physical presence with their retail stores in every high street so that they can achieve national coverage. As recognition of this fact the retailers are reducing the retail stores in the brick and mortar format to fewer sites. While some other retailers are changing the way in which they use their retail space. They are now using their retail space to provide new kinds of product and service to the customers. Some of these retailers are sharing the retail space with other retailers in the market so that they can engage in combined customer offering to the customers. Some of the players who still want to enter this highly competitive and dynamic retail environment are doing so by first tasting the market through their e commerce venture before launching a brick and mortar store. The advances in technology have led to lowering of entry barriers into the market. This is bringing in new players into the market and these new retailers are easily setting up their e commerce stores in order to cater to the customers (Bord BIA, 2011). As the barriers have reduced new retailers are entering into the market. These new retailers are not only from across the street or across the town but might be across the country or across the border (Experian, 2011). E commerce has resulted in the fact that trading of cross border has increased and it has made it much easier for the retailers across the UK or from other competitors across the border to enter in the UK market and increased the global competition in UK retail sector (KPMG, 2015). Figure 1 rise of on line market place. (Source: RBS, 2013) The consumers in UK will continue to demand increasing convenience or premium consumption, experience consumption and segmentation of market and groups. It is also noticed that lifestyles of the people are also changing. It is noticed that people are working for longer time or longer hours that they used to before and are entering the labour market for working part time. This will lead to the fact that the consumer demand will increase towards choice of high quality of goods and service that is easy to purchased and delivered quickly. This is also likely to have an effect on the fact that more no. of stores will be forced to adjust the opening hours of the customers to meet the changing lifestyle of the customers. Another factor that is shaping the market place is the fact that the UK is experiencing a demographic shift to an older population. It is estimated that by the year 2033 around 20.5 million will be over the age of 60 years that will comprise of 29% of population (Department of Business innovation and skills, 2013). In line with this trend the retail market in the UK along with the product and service that they offer has to change keeping in line with this aging population. Figure 2: The changing face of retail industry (Source: Deloitte, 2011) Figure 3 New concept store (Source: Deloitte, 2011) There are changes in the retail industry and the retail environment that are leading to the questions about the long term viability of the traditional retail sector in UK. The key pressure on retailers in the market place is likely to be in the following areas: The spending of the consumers is likely to remain less especially for discretionary goods (National news, 2015). Business costs that are both the variable costs and the fixed central costs are likely to rise. The technology in the sector is constantly evolving there by increasing the no. of interconnected devices and is changing the spending behaviour of the consumer (Green, 2015). The market is facing intense competition and this has increased the no. of players that are entering into the sector even from different countries. Retailers are constantly increasing their sustainability spending and this is a parameter that will be increasingly used in judging the commercial performance of the retailers. Suggests strategies and tactics to be used In the present situation it is found that both the upmarket retailers and the discounters are performing well in the market. The one retailer who is getting congested in all the competition is middle group. For succeeding in the retail space TESCO must discover its value proposition, that is to say the unique factor or the service that TESCO brings in which is not delivered by other retailers. Analysts feel that price is not the key to succeed in the market place. Although it was found during the recession period that the discounters performed well but this trend would not last forever. It is found that the discounters are already losing market share in Germany as people start looking for something extra. Through the decade there have been enormous changes in the market place and psychology of the customers. The customers are increasingly more focussed on the value that is being offered by the retailers. As the wage increases were slim and the inflation was high it was noticed that the consumers started reducing their spending specially of the discretionary goods and the effect was that the discounters rose to the occasion and grabbed the market place (BBC, 2015a). The consumers in the retail industry are now more focussed on the service aspect and this will result in the fact that if TESCO is more focussed on service aspect, innovation and is based on new thinking it will be likely to succeed in future (BBC, 2015b). If TESCO is able to deliver these aspects, it will be likely to succeed in the future. Another feature that the retailers must incorporate to be successful in the market is that TESCO should become more sustainable. The sustainable business agenda is the key term which will drive the performance of businesses in future. It was found in the survey that about 60% of the consumers gave greater preference to the environmental impact of the retailers than the brand name of them. 22% of the consumers surveyed were even ready to spend more in order to have a green product. Another factor that is noted is that the competition in the retail market has increased a lot and the market is facing the incidence of no. of players from mainly three different sources. These are international players who are entering into the market, retailers in the grocery sector and the retailers in the pure play online space (Reuters, 2015). This has resulted in the fact that TESCO has to change their strategy and has to introduce new strategies to enter the market place. The TESCO has to notice the fact that more and more consumers are shopping online and has to rebuild its online and mobile sites and close some of the brick and mortar stores to increase the profitability. Tesco can also focus on remodelling the stores, by reducing the inventory and the orientation of the stores and by introducing digitization and convenience in every aspects of shopping. A separate section can be incorporated in the stores and online platform of Tesco to focus on the aging customers and their requirements. Conclusion After going through the essay it is seen that the retail space in the UK market is fast changing. The change is being fuelled by the change of test and preferences of the customers and the change of market demographics. Other factors that are driving the change are related to economic condition and the technology in the market. In light of this changing scenario TESCO too has to change its strategies and policies to cater to the new market environment and dynamics otherwise they have to perish and be obsolete. References Deloitte, 2011. The Changing face of retail. [Online]. Available at: < http://www.deloitte.com/assets/Dcom-Germany/Local%20Assets/Images/06_CBuT/2013/CB_R_store_of_the_future_2013.pdf > [Accessed 13 May 2015]. Department of Business innovation and skills, 2013. A strategy for future retail. [Online]. Available at: < https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/252383/bis-13-1204-a-strategy-for-future-retail-industry-and-government-delivering-in-partnership.pdf > [Accessed 13 May 2015]. RBS, 2013. Retail 2023: Trends affecting retail strategy over the next decade. [Online]. Available at< http://www.rbs.co.uk/content/corporate/downloads/20130RBS_Retail_Report.pdf > [Accessed 13 May 2015]. Bord Bia., 2011. Retail markets: today & tomorrow. [Online]. Available at: < http://www.bordbia.ie/industry/manufacturers/insight/publications/bbreports/Documents/Retail%20Trends%20-%20Ireland%20and%20the%20UK%202011.pdf > [Accessed 13 May 2015]. Experian, 2011. The changing face of UK retail in today’s multi-channel world. [Online]. Available at: < http://www.experian.co.uk/assets/business-strategies/white-papers/RWC-whitepaper2.pdf > [Accessed 13 May 2015]. KPMG, 2015. How is the internet changing UK retail? [Online]. Available at: < http://www.retailthinktank.co.uk/white-papers/how-is-the-internet-changing-uk-retail > [Accessed 13 May 2015]. BBC, 2015a. UK economic recovery may be ‘bypassing’ retail sector - says KPMG. [Online]. Available at: < http://www.bbc.com/news/business-31812849 > [Accessed 13 May 2015]. BBC, 2015b. UK retail sales rise helped by housing market recovery. [Online]. Available at: < http://www.bbc.com/news/business-32063300 > [Accessed 13 May 2015]. National news, 2015. Sunniest April bright for retail. [Online]. Available at: < http://www.stroudnewsandjournal.co.uk/news/national/12943871.Sunniest_April_bright_for_retail/ > [Accessed 13 May 2015]. Green, C., 2015. How retailers can understand the connected consumer. [Online]. Available at: < http://www.information-age.com/technology/security/123459415/how-retailers-can-understand-connected-consumer > [Accessed 13 May 2015]. Reuters, 2015. Fitch: Carrefour, Tesco Profiles Diverge; UK Competition Intense. [Online]. Available at< http://in.reuters.com/article/2015/04/29/idINFit92113320150429 > [Accessed 13 May 2015]. Sullivan, M., and Adcock, D., 2002. Retail marketing. London: Cengage Learning. Read More