Macro-Environment of Food Retailing Industry - Essay Example

The paper discusses what led to the request for an ombudsman to provide a non-partisan view on retailer and supplier disputes. A code of conduct is intended to be introduced into the contract agreement between retailers and suppliers. Employee compensation must satisfy the requirements of the National Minimum Wage Law. Labor laws are stringently implemented.

Economic environment

Supermarkets take up 73% of the food retailing industry in the UK. Food and drink account for 65% of total retail sales (including non-food items). The economic system of the UK is capitalist. Liberal economic policies foster competition. The stagnating growth and reduced profits of the retailing industry are facing the specter of a 5% increase in doing business with effect from April 1, 2009. The decision has been delayed for the moment. The economy has seen recessionary trends in recent times. This has affected the willingness of customers to spend on discretionary items though the outgo on food continues. The food retail industry has matured in the country and profit margins are pinched (2-6%) as the fight for market share heats up. Inflation has been high though and retailers have had to cut prices and offer higher quality to drive sales. The big players in the food retail industry have seen pay hikes at an average of 3.7% while other retailers have limited the outgo to 3%. Retailers are under intense pricing pressure due to customer demand for high-quality low priced goods.

Social Environment

It is evidently clear from the discussion that the customer demographics have undergone a change. Single and dual-member families with smaller purchase requirements have taken the place of the larger families of the past. Increase in the number of working women. The customers are growing older with single pensioners forming a large part of the customer population. The customers are not limited to a retail outlet and are likely to search for good buying options. They are aware of the price and quality that they can demand.