Tesco floor space 1976-1984
Floor space Number of Average
Sq.ft. Outlets sales area
Sq.ft.
1974 4 626 000 771 6 000
1984 6 826 5000 369 18 500
Source: Audits of Great Britain
The above table shows that although the number of store outlets almost halved in the ten years, the average sales area had more than doubled. The outlets were greater in size so therefore providing more stock to the consumer making the business more successful. The reason for the grocery retailers closing down stores and opening larger units in out-of-town locations was due to the demand pattern of the consumer; convenience, fresh foods, merchandise range, car parking, store layout and value for money.
1.Handbook of Retailing, p.34-35
2.Lecturer’s notes, Lorraine Quinn
4. SWOT analysis
- Strengths
Due to the fact that multiples are chains with over 10 stores, they are able to buy in bulk and sell at low prices. Many stores which are multiples are well recognised due to great advertising and selling techniques, they can offer their own brands and again sell these at low prices. An example of a store that sells own brand products is Safeway. They offer a wide range of items at extremely low prices all of which contain the Safeway name and logo. The strength of buying power achieved by the multiples is significant. By the time the multiple has claimed or negotiated all discounts, allowance contributions and rebates, the net buying price can be at least 10 per cent less than the best terms available to the independent.
- Weaknesses
Many multiples have extended their opening hours to suit working housewives etc although this is an advantage to the public; the number of workers has declined due to this, as the unsociable working hours do not suit most of these people. As the number of employers decrease the quality of customer service will also decrease causing major problems in these stores. An example of a store, which has changed its opening hours, is Asda. Problems can arise due to cash payment methods for example, since it takes from seven days to two weeks for a check to clear, merchants must wait to collect the funds. In cases of check return and check fraud, it is conceivable that merchants could end up writing off 50 percent or more of the value of the check just in processing fees.
- Opportunities
Nowadays more and more multiples are expanding their stores while not opening up more. This is due to the demands of people in society today. They want higher quality stores with greater facilities available. To do this many multiples had to close down smaller stores and open large stores in out-of-town locations. This allowed them to expand to suit the customer’s needs. Opportunities available to these multiples is; the more space they have at selected locations, the more room they have to expand allowing them to carry on satisfying customers demands.
- Threats
As many multiples have a wide range of large stores, this could lead to bankruptcy if they are not making enough money to keep the stores running. A great deal of these multiples offer high quality goods at low prices, this could be the worst thing they could do because if they do not make sufficient funds from their more expensive products, they could face major problems paying for the up-keep of their stores. A prime example of this was Asda, in the 1980s it nearly went bankrupt and had to obtain help from the Government.
1.Retail Marketing, Peter J. McGoldrick
2.Lecturer’s notes, Lorraine Quinn
3.Handbook of Retailing, P.38-39
4.Website;
5. PESTEL factors
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Political
Employers need to remember the ‘Working Time Regulation, 1998’ when setting up employees hours. Due to these regulations employees can work a weekly average of 48 hours an average daily day of 8 hours. This could cause problems if employers do not work by these rules and could result in them being sued. Employers need to be aware of the ‘Resale Prices Act 1964’ it is the abolished law for minimum prices. On pricing, it concluded that there were two practices, which were operating against the public interest when carried out by the largest multiples
- Selling some frequently purchased products below cost which contributed to a situation where the majority of products were not fully exposed to competitive pressure (Asda, Morrisons, Safeway, Sainsbury and Tesco); and
- Varying prices in different geographical areas in the light of local competition so that again the majority of products were not fully exposed to competitive pressure and competition in the supply of groceries was distorted (Safeway, Sainsbury and Tesco).
Not all the supermarkets within the range of inquiry conducted these practices. A number of possible remedies to these pricing practices were considered, including a ban on below cost selling and requiring the supermarkets to put their prices on the Internet.
5.2 Economic
Retail sales are now used as an important economic indicator; they reflect whether consumers feel confident about their future incomes. Surveys are done to find out where people are spending their money, retailers take note and launch sales, mark down prices. Factors, which could affect sales, are inflation. It determines wage rises and is a measure of the rise in prices between one year and the next. Inflation is determined by levels of consumption, and is also determined by the strength of the pound (£) against other currencies. Unemployment shows a downturn in the economy and puts retailers at risk in areas where there is one single employer.
1. Website,
2. Website,
3. Lecturers notes, Lorraine Quinn
5.3 Social
Increased retail change nowadays is because there are more pressures on children for first class education. Also, more women are in higher paid employment or are entering education so therefore do not have families. This results in a top-heavy population, more old age pensioners and fewer children. Nowadays more and more people are willing to use credit cards so they are more likely to be in debt. One of the busiest trading days is a Sunday and churches struggle to attract people on Sundays. Social factors are now affecting religion. Crime has increased so there has been an increase in security on retailers for example; staff theft, robbery and till snatches. More and more people are buying cars so there is an increase in out-of-town shopping.
5.4 Technological
In recent years there has been an increase in mobile phone and computer shops but it is not only consumers who are making use of technology, retailers are now using CCTV, EFTPOS (Electronic Funds Transfer at Point of Sale System – use of Credit Cards/Switch), EDI (Electronic Data Interchange), and bar coding. These have benefited retailers in a huge way as they gain greater information and therefore can increase their productivity. As technology moves on and better items are produced, sales will increase. Examples of new technology produced over the years are; microwaves, washing machines, dish washers, digital television, WWW and broadband.
5.5 Environmental
Environmental issues, which could affect multiples, could be planning permission; will the store have roads leading from the front and back? Will houses or trees have to be removed in order to build new stores? There are great amounts of planning issues, which need to be considered before a new store can be opened. Weather conditions could affect the opening of stores, therefore income will decrease
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Legal
Storeowners need to be aware of existing laws for example, ‘Resale Prices Act 1964’ this is the abolished law for minimum prices. There are two main branches of law; ‘Criminal Law’, shoplifters would be charged under this and ‘Civil Law’, involves individuals rights and wrongs. Laws differ across Scotland, England and Wales, Northern Ireland and Europe. Sunday trading is still an arguable issue due to the rapid decrease in people going to church due to retailers opening on Sundays.
1. Website,
2. Website,
3. Website,
4. Lecturers Notes, Lorraine Quinn
- Recommendations
The twelve largest multiples in the UK represent 55 per cent of UK grocery sales. The UK multiples account for 80 per cent of the retail food market there and are currently involved in a market share war. The major UK competitors are Sainsbury, Tesco, Gateway, the Argyll Group and ASDA. Although they are involved in a share war, the ten largest retailers in the UK already have a 40 per cent share of the market. This is estimated to increase to 50 per cent by the year 2010.
Multiple stores may be in competition with their suppliers so far as promoting their ‘own-label’ product ranges are concerned. The fight for shelf space and position is set to increase.
As technology increases in the UK sales will increase thus allowing multiples to expand their stores.
-
Website,
- Lecturers Notes, Lorraine Quinn
- The Complete A-Z Economics & Business Studies Handbook
7. Bibliography
Books
Nancy Wall, Ian Marcousé, David Lines and Barry Martin - The complete A-Z Economics & Business Studies Handbook, 2nd Edition
Alan West – Handbook of Retailing
Peter J. McGoldrick – Retail Marketing
Websites
Others
Lorraine Quinn – Lecturers notes
- PESTEL factors, 11/11/02
- Information on Multiples, 08/10/02
- Information on supermarkets, 10/10/02
