The Competitive Environment of the Retail Grocery Industry in the Uk

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THE COMPETITIVE ENVIRONMENT OF THE RETAIL GROCERY INDUSTRY IN THE UK

By

International Business Environment-MGT2540

Seminar Tutor: Camilla Hadi Chaudhary

Word count: 2720

December 2016

ABSTRACT

This report is an industry analysis of the UK retail grocery industry. It also analyses and examines key macroeconomic factors that influence the UK retail grocery industry. This industry is an Oligopolistic market consisting of 4 leading retailers that wield power over the industry.  However, in recent years the industry structure has changed due to certain factors and forces examined in this report.

The purpose of this report is to give a better understanding of the industry in general, to consider the growth and evolution schemes used by the grocery retailers and also to analyze the factors beyond their control that have a profound impact on the industry.

TABLE OF CONTENT

Content                                                                                                Page          

1.0      Introduction                                                                                                                    4

2.0      Macro Environmental Elements affecting the retail                                      6

             Grocery industry in the UK

2.1       Political Factors                                                                                                            6

2.1.1    Brexit                                                                                                                                  6

2.2       Economic Factors                                                                                                         7

2.2.1    Increase in VAT                                                                                                               7

2.2.2    Decrease in disposable income of households                                                      7

2.3       Sociocultural Factors                                                                                                  8

2.3.1    Health Consciousness                                                                                                    8

2.3.2    Demographic Changes                                                                                                   8

2.3.3    Changes in consumer purchasing patterns                                                             9

2.4       Technological Factors                                                                                                 9

2.4.1    Self-service Checkout                                                                                                      9

2.5       Environmental Factors                                                                                                10

2.5.1    Sustainable consumption                                                                                               10

2.5.2    Weather                                                                                                                               10

2.6       Legal Factors                                                                                                                     11

3.0       Conclusion                                                                                                                          12

3.1        Stability and Predictability                                                                                             12

              Bibliography                                                                                                                     14

1.0 Introduction

The UK Retail Grocery Industry is one of the most competitive and cutthroat in retail (Retail Think Tank, 2016). In April 2014, the industry was estimated to be worth around £174.5 billion, with a slight increase of 2.8% from 2013 (Anon, 2016). This growth, however, was the poorest growth rate compared to the previous 10years. There has been a drastic change in the industry over the past 10years. This change is due to several factors namely, effects of the 2008/2009 recession, changes in consumer behavior and their shopping patterns and the dynamic growth of discount grocery retailers, e.g., Lidl & Aldi which has increased competition in the industry. The emergence of these discount grocery retailers have shaken up the industry and have triggered price wars driving top retailers including Tesco to implement deep price slashes. These price wars are great for the consumers as prices of groceries are at an all time low.

The grocery market in the UK consists of various types of selling points as mentioned below:

Hypermarkets: These stores are huge regarding land. Usually, consist of a full range of products.

Supermarkets: Considered to be mainly focused on food items relatively smaller than Hypermarkets.

Convenience stores: Convenience stores are smaller stores in comparison to supermarkets which are as per the name suggest convenient for the buyers as these stores are open for 24 hours; they usually have less variety of products.