Competition in UK food retailing supermarkets
Every other day, supermarkets constantly review their numerous marketing strategies to increase their number of customers. However, according to Seth Randall (2001), there are only two major strategies used by the supermarkets, which are, reducing their prices and looking for new sites. With the number of potential sites for opening new stores decreasing, other strategies have since been devised. The level of competition in food retailing now is so high that some of the supermarkets which had been reporting high growth rate now report decline in growth while emerging supermarkets indicate impressive growth. A good example is the case of Waitrose which reported a fallback in its growth rate and now only recorded a growth rate of 1.3 in the end of 2008 while other outlets like Asda and Morrisons all recorded a growth rate of more than 9.0 at the end of 2008.
Over the past years, the face of food retailing in UK has been changing from time to time. Supermarkets now focus on increasing their space size to hypermarkets and also extending their opening hours. Competition also now is on the range of products sold to the consumers. Initially, most grocery stores only sold basic commodities such as bread, milk and locally available fruits and vegetables. Today, food retailing supermarkets are going the extra mile to make sure that their customers get not only the best quality of these products, but also a wide range of exotic fruits, meat and also fresh fish. Other supermarkets have chosen to specialize on a specific type of foods for example Aldi specializes in selling canned food while Iceland specializes in the sale of frozen food. All these choices are aimed at making their products and service unique so as to impress and attract customers (Hingley, 2005).
Given that pricing is the main strategy for competition that has been in use by major food retailers, most food retailing supermarkets have been experiencing small revenues and their growth efforts have been hampered. Today, the strategy for winning more customer trust has shifted to product innovation. As shown by the example of Iceland and Aldi dealing with a specific type of product, food retailing supermarkets have also introduced technology to improve their customer service and shopping experience for their customers. Focus has now also been put on reducing the overall time needed by a customer for their shopping experience. With the changing shopping trends in the UK customer base, supermarkets have introduced innovative solutions to help their customers shop at ease and in the shortest time possible. They have introduced home shopping systems where a customer shops from home over the internet or telephone 24 hours of the day. A good example is the case of Tesco which has home delivery service and had around 200,000 customers on home shopping by 2006 (Rhodes, Warren Carter, 2006). Asda and Sainburys also reported to have heavily invested on this type of service (Telegraph UK. August 29, 2009).
Although competition between supermarkets has been there for a long time, the competition strategies being employed today are a bit different. Initially competition between supermarkets was based on pricing mechanism and the major supermarkets were reporting high profits despite their prices being higher than other food stores. A good example of such case is when major supermarkets have been accused of price fixing in the past. The office of Fair Trading (OFT) have in the past investigated major food retailing supermarkets for accusation of uncompetitive behaviour and excessive profits (Rhodes, Warren Carter, 2006). These claims originate from the fact that food prices at supermarkets are much higher when compared to the prices they get them from the suppliers. The major reason that has been given for this is that supermarkets invest a lot in creating brands for the foods they sell. This is a competition strategy which helps them create unique brands for their products so as to retain their customers. For example, supermarkets buy fresh produce from their suppliers and then repackage them to produce unique products for their shelves. According to Cole (2004), major brand names such as Unilever, Heinz and Kellogs today are forced to produce under supermarket brands so that they keep their supplies to these supermarkets.
To sum up, competition among food retailing supermarkets in UK is increasing by the day and different strategies are being used to retain customers. They include pricing, product range, innovative solutions such as increasing space and reorganizing supply. This competition has created a unique food retailing business in the UK different from that in the rest of Europe.