RETAIL SUPERMARKET INDUSTRY

Individual Development in the Global Food Retail Supermarket Industry



Individual Development in the Global Food Retail Supermarket Industry

Introduction

The structure of the global food industry is continually changing and evolving as food suppliers, manufacturers, and retailers adjust to meet the needs of consumers, who are increasingly demanding a wider variety of higher quality products. The latter half of the 20th Century, in both Europe and North America, has seen the emergence of the supermarket as the dominant grocery retail form. The reasons why supermarkets have come to dominate food retailing are not hard to find. The search for convenience in food shopping and consumption, coupled to car ownership, led to the birth of the supermarket. As incomes rose and shoppers sought both convenience and new tastes and stimulation, supermarkets were able to expand the products offered. The invention of the bar code allowed a store to manage thousands of items and their prices and led to 'just-in-time' store replenishment and the ability to carry tens of thousands of individual items. Computer-operated depots and logistical systems integrated store replenishment with consumer demand in a single electronic system. The superstore was born.

The global retail industry has travelled a long way from a small beginning to an industry where the world wide retail sales alone are valued at £6 trillion (Source: 2003 Global Retail Report, Deloitte Touche Tohmatsu). The top 200 retailers alone account for 30% of worldwide demand. Retail sales being generally driven by people's ability (disposable income) and willingness (consumer confidence) to buy, compliments the fact that the money spent on household consumption worldwide increased 68% between 1980 and 2003. The leader has in-disputably been the USA where some two-thirds or £6.2 trillion out of the £8 trillion American economy is consumer spending. About 40% of that (£2 trillion) is spending on discretionary products and services. Retail turnover in the EU is approximately Euros 2000 billion and the sector average growth looks to be following an upward pattern. The Asian economies (excluding Japan) are expected to grow at 6% consistently till 2005-06. Positive forces at work in retail consumer markets today include high rates of personal expenditures, low interest rates, low unemployment and very low inflation. Negative factors that hold retail sales back involve weakening consumer confidence. (Dumas, 2007)

The aim of this paper is to analyse in depth the reasons behind the changes in this industry and some of the effects that have resulted from these changes, based on both considerations theory and international experience. In particular we analyze the effects on relations between suppliers, distributors and their consequences on the final consumer. It should be noted that the relationship between pro- suppliers and distributors is perhaps one of the most discussed recently both in the world and in Chile regarding this issue. It also examines the impact of the new industrial organisation in the emergence of private labels. From a theoretical standpoint, one could argue that the concentration of the distribution industry shifts the bargaining power from suppliers ...