SUPERMARKET MARKET ANALYSIS

Supermarket Market Analysis

Table of Contents

Introduction3

Analysis4

Environmental Advantages5

Economic Advantages5

Socio-Cultural Advantages6

Technological Advantages7

Market Attractive7

Smaller format stores8

Enlargement of the EU8

Centralisation of supply network8

Non-food product lines9

Loyalty schemes10

Conclusion10

References12

Supermarket Market Analysis

Introduction

In the UK, the supermarket and superstore market continues to grow. In 2002, retail sales of food through supermarkets and superstores reached an estimated £83.68 billion, a growth of 5.1% on the previous year. The market is composed primarily of major chains, with retail outlets. Alongside these are smaller operations with a regional bias, although these chains are now expanding nationwide. In addition to these are the limited assortment discounters (LADs). In general, these are operated by European firms and offer basic food products aimed at the lower end of the mass market (Lloyd and Morgan, 2006).

The UK supermarket and superstore market is dominated by major UK companies such as J Sainsbury PLC, Safeway PLC and Tesco PLC, although the US retailer Wal-Mart bought ASDA Group Ltd in 1999. European involvement in the UK market is restricted to the LADs such as Aldi Stores Ltd and Lidl Ltd. Rather than foreign involvement in the domestic market, the general trend is for UK companies to expand overseas. Tesco has expanded extensively into Central Europe and Asia, and J Sainsbury has interests in the US. Other supermarket chains include Waitrose, Somerfield, Morrisons, and Iceland and for the purpose of this report Marks and Spenser will be included. Typically Marks and Spenser is viewed as a department store, but especially with the introduction of its new “Simply Foods” stores it is also a store where customers will purchase all their groceries (www.competition-commission.org.uk).

Analysis The status of the supermarkets is that of a dynamic one as it requires consideration of the future, not just the past. The retailers will have to adjust and adapt to the changes in the market, not only to ensure survival but to take hold of any rising challenges or opportunities within the sector. The majority of the supermarkets will face a simple situation. The criteria which supports this derives from the financial position and market position. The top supermarkets in the economy possess a financial clout that enables them to drive their purchasing costs down and when buying products in mass. The greater proportion of firms exhibit diversified products which enables them to achieve a more reformed future than a complex one. Tesco, for example, along with many other leading supermarkets offer an extensive scope of diversified services ranging from loans, insurance and mobile phone tariffs (Worthington et al, 2001).

Environmental Advantages

Any environmental or government issues need to be addressed. Advantages including monopolies legislation or environmental protection laws are important. The legislation stands that any of the supermarkets are not allowed to build on 'brown belt' land, as this is prohibited to protect the environment. Regarding this, thought also has to be given to where to new buildings are situated as noise, pollution, residential areas etc have to be considered (Perman, 2004). Foreign trade laws could affect the retailers in the near future ...