In order to understand more about retail competition, this article will be critically analyzing the competition within UK's grocery industry. The market for Groceries in the UK is a mature industry, with growth rates below that of GDP and spending.

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Evaluating the Competition of UK’s Grocery industry

Contents:

      Introduction                                                                               

      Characteristics of the Grocery Retail Industry and the Market                

      Influences of Grocery Market

      Key competitive dimensions in this industry

      Types of Competitions

      Future changes in Grocery Industry

      Conclusion  

      Bibliography

Introduction

In order to understand more about retail competition, this article will be critically analyzing the competition within UK’s grocery industry.  The market for Groceries in the UK is a mature industry, with growth rates below that of GDP and spending. This lack of growth is promoting competition, as the businesses within the industry strive to retain their own customers. The industry is now living in a goldfish bowl, with both consumers and regulators far more aware of potential abuses within the sector, and as such, companies must be far more aware of any areas of their business practices that would not stand up to outside analysis. This article will also be looking at the biggest supermarkets in the UK, such as Sainsburys, Tesco and Asda, to see how they differentiate themselves to gain the consumers and market share.

Major Characteristics of the Industry and the Market

 The UK Grocery Retail Industry can be identified as those companies who retail groceries with in the United Kingdom. The major characteristics of the UK grocery retail industry are as following:

First of all, the industry is essentially an oligopoly. In the UK, four biggest supermarkets (Sainsburys, Tesco, Safeway and Asda) dominate the grocery retailing industry, control over 60% of market. There has been a decline in small and medium sized retail businesses within the industry, and an increasing trend from town centre to out of town shopping. Supermarkets now have offered added value to their customers by stocking electrical goods, books, CDs, and other non-traditional stocks to increase their market share and profit margins.

Secondly, the industry is characterised by largely homogenous product, and as a result is extremely competitive. The main groups differentiate themselves by spending huge money on advertising and branding.

There are also some main characteristics of grocery market:

Firstly, every member of the public can be called consumer in the Grocery Retail Industry. Everyone has to eat, therefore has to buy what they need from groceries.

 

Secondly, consumers are unlikely to have their loyalty to individual companies with in the industry. This is because the industry is selling homogenous product and is extremely price sensitive.

The other major factor of the market is the changing needs and wants of the market. Since people’s income has increased, the people’s needs and wants have changed. People want more different goods. The demand of variety, quality has increased. This is also because of people nowadays become more aware about health issues.

 Influences of Grocery Market

The nature of competition is affected by environment, supply and demand factors.

Macro environment Factors

First is about information technology innovations. As Internet technology development, it is widely used within the Grocery Industry. It influences the industry by three areas. The first is the use of Loyalty Cards, which is aimed for winning consumers’ loyalty. It delivers right information about discounts and special offers to consumer to attract consumers. The second is the use of Internet operations and strategies. This is aimed again to gain loyalty to a company. Every group wants to provide a value added service to differentiate itself from their competitors. The last is about supply chain innovations, which have been growing over the last two decades, but the opportunity to take advantage of substantial cost savings has been growing recently. Asda, for example, has started to introduce a network based, automatic JIT inventory system modelled on their parent company, Wal-Mart, which promises to reduce inventory costs by significant amounts when it becomes fully operational.

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Second is about Organic and Health Foods. The public has been becoming more aware of the food that they eat due to recent food scares, such as BSE, Salmonella and FMD. This leads to a growing demand for organic food. The consumer is willing to pay more for better quality, health food.

Finally is about changes in consumer characteristics. Consumers play a very important role in the retail industry. Their choice and behaviour influence the retail industry. Nowadays, people’s wealth increases, with the decrease in time for shopping. Besides, people enjoy a busier lifestyle, fewer people cook everyday ...

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