A Marketing Comparison Of UK Supermarkets

Tesco, Asda, Sainsbury and Morrison are leading supermarkets in UK. They are operating with huge network of stores, with the food and non food items. New strategies to cultivate each other customers, to increase market share and profit, are always in pipeline.

These four grocery retailers are the leaders of UK retail market and known as big four. The record shows that Tesco, Asda, Sainsbury and Morrison increase their percentage to 65.4 out of £118.2 billion market and increased their sale by £3.3 (without fuel), where in 2006 percentage was at 63.6.

The extraordinary performance from this group of retailers having the big impact in the growth of market, due to highly professional service and management and capturing the new areas.

To compare Tesco, Asda, Sainsbury and Morrison is very interesting because they all trying to capture market share with different strategies while offering the nearly same products.

Latest information shows that the Tesco considered as the market leader in these Big four (even the increase in market share of Tesco was less then previous years) due to it strategies of innovation and price control etc.

But overall market position of Tesco, Asda, Sainsbury and Morrison is due to products variety, affordability and easily availability, make them highly successful.

Classification as same Group

This part of the report I will find out the reasons why these four (ASDA, Tesco, Morrison’s, and Sainsbury) are in same group as for as strategies concern. First of all I will mention some key reason as follows,

Strategically all these markets are same in the sense of all its actions.

Due to the market capturing style and other marketing activities Their PEST and SWOT analysis are more or less similar.

Same macro environment Strategy models for application of their profit.

As all these are based on sale of daily use products.

Tesco, Asda, Sainsbury, Morrison’s are they four major supermarket of UK, with their huge network of stores nationally and internationally. The strategies that supermarket managements have to follow its difficult and time consuming, but time consuming did not change their direction, they are focused for there rivals and achieve the targets as well .

Strategically these supermarkets are acting as incorporate, on other hand these super 4,s are acting as retailing trade as well. The far or macro environment which relates to political, economic, socio-cultural, technological, environmental and legal, Tesco

The macro environment relate to different external factors. The strategic position of Tesco Asda Sainsbury and Morrison’s are intact into the macro environment. On other hand internal forces and strategies are same in sense of SWOT analyses. At end all these supermarket are having the same products of daily use to electronics. Initially all of these were started from food products, but as the y profit was increased these markets expand the towards non food items. In 2002 the Tesco aggression as matched by the poor performance from the Sainsbury’s as there aims to analyses Morrison’s strategy in macro environment. The same strategies and competition of these supermarkets give the stable prices, batter quality and a wide range of verities to customers.

Analyze the macro environment that these companies must operate within

Macro environment is one of the external factors some time called as far environment, it shows the external impacts on organization. The far or macro environment relates to:

• Political

• Economic

• Socio-cultural

• Technological

• Environmental

• Legal

These influences may impact business, now or in the future.

Figure: The macro and micro environment

(Source:www.thestairway.co.uk/developing-strategy.html)

Better result could be obtained in retail business, with in as Tesco which managing over eight hundred stores around EU. Tesco provides wide range of business services for the business distribution process of warehousing, advertising, and financial services up to individual as much as possible, transportation and interaction of such services. As we know Tesco took over from market leadership from Sainsbury even using their strategies to become leader. Tesco became the biggest food retailer and keep holding its crown from other rivals since then. The leadership of supermarkets and global structure became the powers of Tesco, which helped it to reduce unit cost of production as the scale of operation increase. It became in apposition to bit the price down for the sake of more sale and to cultivate the customer’s loyalty via giving discounts on manufactured goods, vegetables, etc. also bulk buying is big factors as Tesco requirement is very high, all this is to get high efficiency and to keep at products at low cost.

As Tesco continue to decrease the cost of production it starts showing the advantages and keep getting the higher profits margins. Tesco in 2006give different approach for the business and ask to involve macro environment conditions in business strategies. In 2007 there involves the distribution process to shareholders as dividends and with Tesco growth reflects stability in supermarket chain in UK. In 2007 different strategies used by retailers strategies and grown its profitability, The Tesco successful strategies need to be looked for the business increase according to the retail market and for the increase in market share. For the comparison, the online shopping is on rise on yearly bases since it been introduced. Well online payment methods are still affecting the rise in online shopping because of usual frauds in different online payment and miss use personal details, make people hesitate from shopping online. For batter customer service Tesco frequently used PEST and SWAT analysis in their strategies. That is why Tesco to became ahead of Sainsbury.

In 2006, six thousand households had surveyed and to choose on of Sainsbury, Morrison’s, Tesco and Asda. Majority of the people like to shop at Asda and Tesco was at second. Generally Sainsbury, Morrison’s, Tesco and Asda customers are loyal to them, if they don’t go to Asda they will go for shopping to Tesco, Sainsbury, or Morrison’s. It’s very important to know any technology change in strategies of competitors. “Company response is slow to the opportunities, it can convert them to threats for company”. (Cook and Hunsakar, 2001)

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The reasons for the market leader’s success

The key to success for these retailing companies in UK to become market leader is to provide better valued services at less price, with the abilities of acquiring global procurement approaches by developing a good relationship with their entire stakeholders in chain. The market leaders success and strategic groups have the individual power to combine the brand value in terms of building and creating the sectors in representative reality those things becoming one of big UK successful industry food and general retail sectors and a better strategy, but this is visibility open up the useful opportunities for growth market in the UK retailing business and they added potentially, developing and expanding globally. There are few reason for having a growing financial potency which meaning that those groups have fully holder for continuous awareness of the retail markets value and the positive change drive involve to the customers to established investments growth in rising markets within the UK. The complementing food product as well as non food product ability, in sell out which allows to the group for utilize the augmented scale to influence the value for clientele the throughout universal procurement and supply in efficiencies way. (Jaenicke, Edward C, 2006).

There are reasons behind for the market leader success within retailing sector in UK as importance of its market scale and structure, will have bring to process useful value for the customers point of view. Retailing sector a approaching the widely procurement and focus on relationship among the suppliers and shareholders. UK retailing is increasing its growth and they are stable in market even their internal conditions are not in control of them all the time. Due to good strategies and plane ahead cause the increase in profit and growth, by attracting more customers. Growing more stable customer preferences in providing the latter a better range of products and strong brands. (T. Jenny 2001). UK retailing sectors has the own strategy implying for core business involvement in grocery retailing as well as the market expansion efforts would making large scale move in convenience store sectors within the UK supermarket chains.(C.K. Brain 1998)

UK Food retail turnover within the UK have slowly increased over the years 2004-08. This change is expected to continue although at slower pace during the years. As we can see UK grocery market has been trying to increasing stably. The overall grocery market has grown from £93.3bn in 1998 to £146.3bn in 2008. Anyhow, within the last few years, UK grocery market has been faced on uncertainties, such as the big financial crisis, high unemployment, fully tight household budget, it still acquired reasonable growth rate.

As we all know Tesco is number one largest food retailers in the world, operating though 3,767 stores. The group formats including Extra, Metro, Express Superstore and hypermarkets. The operating group in the UK, and other countries.

Tesco Plc generated revenues of $99,699 million in the financial year ended February 2009, an increase of 14.9% compared to the previous year. The company’s net income totalled $3,975 million in fiscal 2009, an increase of 1.7% compared with 2008. (www.Tesco.com).

As the Sainsbury is a UK food retailer with interests in financial services. Sainsbury has operations throughout the UK. Its businesses comprise of Sainsbury’s 319 convenience, 504 supermarkets stores Sainsbury provide an online shopping home delivery service and Sainsbury’s Bank. The company has range of products as well in food and groceries include alcohol, beverages and clothing, gift and books items, the do electronic kitchen appliances ,paraphernalia, fish and meat, fuel, pharmaceutical and home ware. (http://www.statistics.gov.uk/sainsbury/pro-&,r,98,net). J Sainsbury plc generated revenues of $34,704.8 million in the financial year ended March 2009, an increase of 6% compared to the previous year. The company’s net income totalled $530.4 million in fiscal 2009, a decrease of 12.2% compared with 2008. (http://www.sainsburys.co.uk/sol/index.jsp).

The retailing industry performance forecast to decelerate, though the anticipated CAGR of 3.3% over the five year time 2008-2013, which has been expected to drive the food retailing industry to a value of $194,819.3 million by the end of 2013 year. “Tesco is extending its lead at the top of the UK grocery market and continues to reap the rewards of its national Clubcard, according to the latest figures produced by the Kantar Worldpanel. For the three months to 18 April 2010, Kantar estimates that Tesco has grabbed a 30.5% share of market, up from 30.3% for the same period last year. Strong performances are also being shown by Sainsbury’s and Morrison’s with both retailers growing faster than the market and building their market share. Sainsbury’s market share is now 16.4%, up from 16.2% last year, while Morrison’s has climbed to 11.8%, up from 11.4%. By contrast, Asda is still under-performing the market despite launching a major coupon scheme to boost sales in the new year following a disappointing Christmas. Asda’s year-on-year growth of 2.5% is well behind the growth of the other major retailers and its market share has dipped from 17.0% to 16.9%”. (Jonathan Prynn, Evening Standard).

Compare and contrast any two of the companies in the strategic group

The competition between Sainsbury and Tesco was very high initially because Sainsbury was market leader and innovator for nearly a centaury after its birth in 1869 in London. In 1950 it opened its first branch of self service supermarket in Corydon. In 70,s and 80,s Sainsbury became a dominant force in British retailing. Then the tesco entered as threat in supermarket business. When Tesco became market leader, Sainsbury found it self following Tesco, along with Asda, Safeway, and Morrison. It should not be happen in that way.

Matter of fact the Sainsbury’s polices were very slow moving and traditional for the satisfaction of customers, which allow Tesco go farther to achieve the goal for the satisfaction of customers. Tesco showed progress to increase customers and expanding of Tesco stores all over UK, all this been done in very short time, which was not even expected within that time limit. Tesco club card became the main weapon of the war against rivals. “Clubcard is our way of saying thank you for shopping with us. You collect Clubcard points every time you shop with us. You now get 2 points for every £1 you spend in-store, online for your groceries, DVDs, CDs and Books from tesco.com, and at Tesco direct. You also collect 1 point for every £1 you spend on Petrol, Mobile phone top up and many other places”.

(Source:http://www.tesco.com/clubcard/clubcard/what.asp).

The implementation of clubcard Tesco found the attitude and future demand of the customers. On other side customers enjoyed the point system of the clubcard for reward and discount. On other side Sainsbury was not very claver in the launch of incentive card nationwide. Due to the unfocused approach to the launch of incentive card, because of that when incentive card was offered it could not get the good response from the stockholders. So instead it gives any advantage to Sainsbury, it increases the trouble for Sainsbury, so that is why Sainsbury failed to compete on technology change. In the market for all groups who are making strategies for businesses they all have one point agenda which is, make more and more profit by attracting more customers for their products. That is why if any innovation about to launch in market it is a big risk for the failure. Now a days to open a corner shop is not really a good idea, because the trend of supermarket and their success is gone at very high level. It is due to increase the customer’s attraction towards these supermarkets. Reduce the price to attract and increase the customers, this is very old policy but with very successful results. Sainsbury now has regained the trust and confidence of its customers. In sense of argument, the Sainsbury having the stronger brand name than Tesco, but brand leadership goes to Tesco. Because brand leadership regularly reinvented. By looking market strategy of Sainsbury we can conclude that Sainsbury fail in sense brand leadership. On other hand if we look at the success of Tesco in UK market is based on low price. Low price by offering the range of stores idea and expand this into relaying on service respectively giving Tesco chance to cultivate the customer’s loyalty.

That is why the prediction for 2001 to 2006, was that “Sainsbury will regain 2nd place during this time period ” but this did not happen till 2006. By the end of 2006 Sainsbury group had estate worth of £6.0 billion. Till the end of 2006 Sainsbury was having very serious problems in its distribution system. In 2007 Sainsbury invested further £12 million in depots to keep pace with the sale growth and the removal failed atomised system from its depots. Since 2007 the launch of “king recovery program” the Sainsbury had two consecutive years of sale on increase. As sales started to increase the problems in company distribution system was automatically solved. The price cut, with fresh and healthy food were other reasons for the sale growth. In February 2007 Sainsbury sale was increase by 2.1%. In March 2007 Sainsbury market share was 16.5% and Tesco was at 31.3%. Now we will discuss about online shopping at Tesco and Sainsbury. Well it was beyond the imagination that some could be shopping online for groceries. By shopping at Sainsbury or online we get Nectar point. The quality of food and delivery is always good but Nectar point did not affect, as affective as Clubcard by Tesco. Because over all Sainsbury do not have many stores and they are not open in late nights which reduce the attraction to shop at Sainsbury. On other hand Tesco stores are suited at all important places, Tesco operating one hundred braches in London and two thousand across UK, mostly open 24 hours and remaining ones are open 7am to 11pm, which reduce the chance to go to any other supermarkets.

“Tesco is extending its lead at the top of the UK grocery market and continues to reap the rewards of its national Clubcard, according to the latest figures produced by the Kantar Worldpanel. For the three months to 18 April 2010, Kantar estimates that Tesco has grabbed a 30.5% share of market, up from 30.3% for the same period last year. Strong performances are also being shown by Sainsbury’s retailer growing faster than the market and building their market share. Sainsbury’s market share is now 16.4%, up from 16.2% last year” (source: BFN News, 09:41 AM, Wednesday 28 April, 2010).

Finally I will quote some of my observations, regarding who is offering the best in between Tesco and Sainsbury are following:

Website Navigation: We found Sainsbury’s store to be more user friendly.

It’s easier to find items.

Product Choice: We were looking for organic food and Tesco definitely has a wider choice.

Pricing: Tesco products were cheaper. As for delivery charges, Sainsbury’s was comparatively cheaper but as I mentioned earlier, we had a discount coupon for Tesco.

Conclusion: I would have to give a thumb up to Tesco’s online grocery store because of the overall savings. Plus I get points on my Tesco card.

(Word count: 2875 By: Asad b. MOHSIN)