The UK’s grocery retail sector is one of the most competitive and fierce in retail. Over the last decade, the UK’s grocery retailing landscape has transformed radically, especially emergence of the Germany and Scandinavia deep discount retailers such as Aldi and Lidl in early 1990s.
Hard discount retailer have very distinctive approach than UK’s traditional grocery retail such as Tesco, Sainsbury, Walmart-Asda and Morrison and were lead onto UK by these Traditional retailer which enjoyed high profit margins at the time and they recognised the Gap in the market in terms price and spatial gap in terms of the most deprive area in UK’s towns and cities.
By 2015, Germany discount retails have grown record level which followed a period of gradual increase number of store and most favourable trading characteristics even given recession and global financial crises between 2007 and 2009 (Thompson et al., 2010). Having reached record sales, by end of 2014, Aldi and Lidl’s sales have grown by 22.6% and 15.1% and 4.8% and 3.6% market share respectively. On the other side, big four traditional retail Tesco lost sales 1.2%, J Sainsbury 0.7% and Asda and Morrison both 1.6% as well as 1.2% market share in combine (FT, 2015:1).
The success of German discount retails has become main concern in UK’s traditional retails. Aim of this paper is to investigation the impact of discount retailers on traditional retailers in UK because German discounters not only direct impact on traditional retailers’ market share, also put pressure on increasing operational efficiency and or decreasing prices (Harvard Business Review, 2006 and van Heerde et al. 2008) which lead this paper’s second aim to analyse should existing traditional retailers develop new flexible business model like Walmart (Jia, 2007). Having successful business strategy, it still begs a question what is the future of this German discounter, third aim of this research paper is to investigate can they (German discounter) be able to beat big four UK’s traditional retailers like what Walmart did in US (Jia, 2007) and Ryanair did British airways (Ruddick, 2014).
Due to having time and words limitation, this paper will only focus Tesco in terms of UK’s traditional retailer and German discounter Aldi.
Table of Contents
1. Introduction
2. AIM and OBJECTIVES
3. LITERATURE REVIEW
4. METHODOLOGY
5. Finding and Analysis
i) Impact of discount retailers over traditional retailer Tesco in UK:
ii) Flexible business model:
a) Comparison Aldi strategy with Tesco:
b) Inter-company format change:
iii) Future of Discount retailers:
6. CONCLUSION
i) Impact of discounter:
ii) Flexible model:
iii) Future of discounter:
7. APPENDIX-1
8. APPENDIX-2
9. APPENDIX-3
Research Goals and Core Themes
The primary aim of this research is to evaluate the competitive landscape of the UK grocery market, specifically focusing on the pressure exerted by German discount retailers on traditional giants like Tesco, and to determine whether traditional retailers should adopt more flexible business models to survive.
- The impact of German discounters (Aldi) on the market share of traditional retailers (Tesco).
- The necessity for traditional supermarkets to transition towards flexible business models.
- The future sustainability and growth potential of discount retail chains.
- An analysis of current UK retail business strategies and market performance data.
- Comparison of operational efficiencies between discount and traditional retail formats.
Excerpt from the Book
Impact of discount retailers over traditional retailer Tesco in UK:
It was received wisdom, when I was growing up, that the more expensive or posh the supermarket, the ‘’better’’ and the ‘’healthier’’ it was and the better customer services it was said by business analyst Brinded (2015). Since 1990s, when hard Germany discounter entered in the UK, recognising a value gap in terms of price and a spatial gap in terms of the most deprive areas (Wrigley and Clarke, 1998), discount retailer started reforming the grocer market. The tendency of going posh or paying extra money for sake of better quality food has been changed. Now, British people can be served with same quality food and without dropping family standard but cheaper price. Study suggested Aldi has become second favourite choice on the quality (Sayid, 2015), competing with Waitrose.
Study found that sometime in 1990s, British people started realising that price was often no good to taste or heathier. According to online shopping and celebrity chief Jami Oliver and A Girl called Jack showed that people can get quality food with a fraction and it does not have to be from posh supermarket (Brinded, 2015). Since recession hit the UK, customers started looking cheaper but quality products, Germany discounter won customers heart through hard discounting while UK traditional supermarkets were busy with making their profits. Research established that supermarket which do not provide great deal, cheap food are hurting eventually their profits as a result Morrisons reported its worst set of profit result in 2014. Its pre-tax profit plunged 52% to £345 billion compared to 2013, while revenue fell 4.9% to £16.8 billion in 2013 from £17.68 billion in 2013 (Morrisons-corporate, 2015).
Summary of Chapters
1. Introduction: Outlines the rise of discount retailers in the UK and their disruptive effect on traditional grocery retailers like Tesco.
2. AIM and OBJECTIVES: Defines the research intent, specifically the analysis of competition, business model viability, and future outlook of discounters.
3. LITERATURE REVIEW: Examines academic and industry perspectives on market share erosion, price wars, and changing consumer behavior.
4. METHODOLOGY: Explains the use of qualitative and quantitative secondary research sources to analyze current retail market dynamics.
5. Finding and Analysis: Details the specific financial and operational impacts of discounters on Tesco and proposes strategies like range reduction and hybrid business models.
6. CONCLUSION: Synthesizes findings, emphasizing the necessity for traditional retailers to adapt their strategies to remain competitive against discount models.
Keywords
UK retail market, discount retailers, Tesco, Aldi, price war, market share, business model, consumer behavior, supermarket, operational efficiency, retail strategy, economic recession, grocery sector, profitability, supply chain.
Frequently Asked Questions
What is the core focus of this research?
The research explores the competitive dynamics between traditional UK grocery retailers, specifically Tesco, and German discount retailers like Aldi, investigating the impact of the latter's market entry.
What are the primary themes discussed in the paper?
Key themes include the shift in consumer preference toward discount chains, the impact of price wars on supplier and shareholder relations, and the potential for traditional retailers to adopt flexible business models.
What is the main objective of the study?
The main objective is to analyze the impact of Aldi on Tesco, evaluate if Tesco requires a new flexible business model, and assess the long-term future of discount retailers.
Which research methodology is employed?
The paper utilizes a methodology predominantly based on secondary data, including annual reports, industry publications, and academic journals to ensure cost-effective and timely analysis.
What topics are covered in the main body of the work?
The main body covers market share shifts, comparisons between Aldi and Tesco strategies, the risks of price wars for supply chains, and specific recommendations for traditional retailers regarding range optimization.
Which keywords best characterize this research?
Important keywords include retail competition, discount retailers, market share, price wars, business model flexibility, and UK grocery sector.
How has the emergence of discount retailers affected traditional supermarkets?
Discount retailers have significantly eroded the market share of the "Big Four" supermarkets by offering quality products at lower prices, forcing traditional retailers into costly price wars and operational restructuring.
What does the author suggest as a strategy for traditional retailers?
The author suggests that traditional retailers should consider a hybrid business strategy that combines cost reduction—such as reducing product ranges to improve efficiency—with differentiation to maintain competitiveness.
- Quote paper
- Md Mahabubur Rahman (Author), 2015, Critical analysis of the influence of discount retailers on Tesco plc in the UK, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/318301
