Strategic management business analysis
CHAPTER
14
The UK supermarket sector in 1996
The growth of the superstore is a phenomenon of the last half of the twentieth century, and it is generally accepted that they have provided consumers with more and cheaper products. Superstore growth accelerated with the increasing mobility of consumers. Other factors contributing to the attractiveness of superstores include: the increasing affluence of consumers. changes in consumer lifestyles, particularly since the 1970s. the convenience of one-stop shopping for the consumer. an increasing range of customer preferences based on their own experiences (e.g. increasing foreign travel and the increased sales of exotic foods and wine).
Superstores have had a significant impact on the retailing sector, with 504,800 retail outlets in 1971 reducing down to 320,000 units by 1995 (the fastest rate of decline occurred from 1980 onwards). As Figure 14.1 demonstrates the market share of the four largest grocers of Tesco, Sainsbury, Asda and Safeway rose from just over 35 per cent in 1990 to almost 42 per cent in 1996. This increases to 58 per cent for the nine largest supermarket chains. They had over 63 million square feet of retail space and almost £50 billion of sales from over 3600 stores (see Attachment 14.2c in Section 14.3, page 195).
The Times made the following comments on price competition in this sector.
Received wisdom has it that the big supermarkets, after years of overcharging us all for our basic needs, have been forced by store-wars to cut back on their greed and hand over some of their loot to the shoppers through lower prices. Received wisdom is wrong on both fronts
(The Times, 18th September 1996, Pile it high, sell it dear)
Figure 14.1 Percentage market share of sales in UK.
Sources: The Grocer, MINTEL and extrapolation based on economic growth and planned new store openings and closures during 1996–1997.
It was also suggested that large supermarket chains were ‘a useful example of a cartel
14
The UK supermarket sector in 1996
The growth of the superstore is a phenomenon of the last half of the twentieth century, and it is generally accepted that they have provided consumers with more and cheaper products. Superstore growth accelerated with the increasing mobility of consumers. Other factors contributing to the attractiveness of superstores include: the increasing affluence of consumers. changes in consumer lifestyles, particularly since the 1970s. the convenience of one-stop shopping for the consumer. an increasing range of customer preferences based on their own experiences (e.g. increasing foreign travel and the increased sales of exotic foods and wine).
Superstores have had a significant impact on the retailing sector, with 504,800 retail outlets in 1971 reducing down to 320,000 units by 1995 (the fastest rate of decline occurred from 1980 onwards). As Figure 14.1 demonstrates the market share of the four largest grocers of Tesco, Sainsbury, Asda and Safeway rose from just over 35 per cent in 1990 to almost 42 per cent in 1996. This increases to 58 per cent for the nine largest supermarket chains. They had over 63 million square feet of retail space and almost £50 billion of sales from over 3600 stores (see Attachment 14.2c in Section 14.3, page 195).
The Times made the following comments on price competition in this sector.
Received wisdom has it that the big supermarkets, after years of overcharging us all for our basic needs, have been forced by store-wars to cut back on their greed and hand over some of their loot to the shoppers through lower prices. Received wisdom is wrong on both fronts
(The Times, 18th September 1996, Pile it high, sell it dear)
Figure 14.1 Percentage market share of sales in UK.
Sources: The Grocer, MINTEL and extrapolation based on economic growth and planned new store openings and closures during 1996–1997.
It was also suggested that large supermarket chains were ‘a useful example of a cartel