This study discusses the retail trends in the UK and analyzes Sainsbury’s, the second largest supermarket chain. It includes a SWOT analysis and recommendations for the company.
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Table of Contents INTRODUCTION...........................................................................................................................1 Retail trends.....................................................................................................................................1 Retail industry analysis................................................................................................................2 Analysis of Sainsbury’s...............................................................................................................4 SWOT analysis of Sainsbury’s....................................................................................................5 Recommendations............................................................................................................................6 Action Plan......................................................................................................................................7 CONCLUSION................................................................................................................................8 REFERENCES................................................................................................................................9
INTRODUCTION Selling products to customer in small quantities for their consumption is known as retail process (Chhibber, 2019). This study is based on retail sector and Sainsbury’s which is the 2nd largest chainof supermarkets in the UK. This present study is about to discuss trends of retail sector of the UK as ho changes in economic, social and environmental changes are affecting companies. Which changes are in the favour of companies and are in against. Further, it will also show that how Sainsbury’s analyse internal business environmental factors with the help of SWOT analysis tool. This analysis allows it to make an action plan on the basis of weaknesses and other factors and making an effective position in the market. Retail trends In the context of retail sector and its trends it can be said that it is changing at an unprecedented speed as it has several opportunities as well as challenges. As compare to 2010, 2019 is being estimated and considered slowest rate of spending growth and its all because of Brexit uncertainty.One of the mainloss and problemswhich people faced with Brexit uncertainty is job lost of around 85000 with around 9,169 shops closure. On the flip side, due to advanced technology online selling is stated raised and continued to grow (Retail trends,2020). Payment flexibility One of the current trends is changes in payment system due to advanced technology and sues of technology by all people to the great extent. In this sector, payment changes are one of the main changes which occur and those companies who have flexibility skill they can take advantages of this current trends. It will be difficult for small organizations to adapt changes. Consumers prefer to pay as per their convenience as now there are several options and ways has come in the market like: Phone Pay, Pay tm and others. So, it can be said that mobile payment is one of the current trend in retail sector which needs to be adapted by companies like Sainsbury’s Tesco and others in order to provide convenience and satisfy needs of customers (Top Retail Trend,2020). 1
Figure1: Retail trends Sources: (Digital will continue to Disrupt Physical Retail in the UK,2020) From the above data, it can be said that 2019 year for retail companies was the worst year because total sales in this year declined by .1% and 1.2 growth in the year of 2018. It shows that retail sector companies like Tesco and others will have to face challenges in 2020 because of technology and digitalization. Those companies who are best in physical store and retailers, they will also have to make change in their strategies in order to make themselves competition as per the changes in retail sector. Retail industry analysis Economic factors In this context, it is stated that over the past ten years, economic output of retail sector has fluctuated to the great extent. In the year of 2017 it was around £92.8 billion which is considered as around 5.0 % of the UK’s total gross value added. 2
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Figure2: Economic changes Sources: (Retail Sector in the UK.2018) From the above it can be said that there is a fall in economy output of the UK and gradually it made a growth but it was not effective. Financial crisis and other factors like shop closure, changes in trends, employment loss affected on the economy to the great extent. In the year of 2013, this retail sector started to grow and improve the economy and till 2014 it grew strongly and effectively. After some years in the year of 2017 again it started to grow less strongly. Shop closure 3
Figure3Shop Closure in Retail Sources: (Retail Sector in the UK.2018) In this context, it is analysed that approximate 28 retail companies with having multiples stores in the UK have ceased trading in the year of 2018. It affected around 2,085 with 39,000 jobs lost. It is high number of affected stores and employment which affected on the UK economy in a negative and to the great extent. In the retail sector one of the main retail which affected the most was clothing as around 25% of clothing retail stores affected. Analysis of Sainsbury’s Sainsbury’s is one of the well-known supermarket chain and retailer in the UK. It is second largest chain of supermarkets in the UK and one of the main reason of its position in the market and retail industry is its qualitative products, varieties of products with effective pricing strategy. This retailer was founded in the year of 1869 by John James Sainsbury. Headquarter of this retailer in is London. It is stated that it has around 1,415 shops via which it provides services and products to customers. Vision of this company is to become the most trusted retailer and making an environment where people love to work and buy products as well. In addition, it is also stated for making a position in the market it changes itself and its strategies as per the 4
changing environment (Background of Sainsbury’s,2018). As per the current changing needs of customers, it has made an effective use of digital marketing and delivering products and services online to customers. With the help of its official website and other social media platforms it takes feedbacks from customers in order to know its actual position in the market and how customers view it and its services. By taking feedbacks it makes changes in its strategies accordingly which makes customers feel valued. It is also stated that it focuses on satisfying employees by providing them rewards and using effective management and leadership styles. On the flip side, it is also stated that there are some external environmental factors which are creating barriers in the path of its successful like financial crisis, Brexit, recent Covid-19, political instability of some countries in which it operates. It also focuses on sustainability and uses effective strategies to reduce all these problems. SWOT analysis of Sainsbury’s There are several internal environmental factors which can affect this retailer in both positive and in negative manner. Making itself prepare for adapting changes and reducing negative impacts it makes an effective use of SWOT analysis tool. It allows it to analyse internal factors and make appropriate changes (Jiang and et.al., 2018). Strengths One of the main strength of this retailer is it has made right expansion of business moves which made it able to increase market shares. From small grocery stores it made large supermarkets which now satisfy needs of customers. Low cost strategy is one of the main strength which allows it to attract customers and having 2ndposition in retail sector. It offers varieties of products for both males and females and it does not discriminate customers in any manner. Ability to innovate products and services is other ain strength which allows it to take competitive advantages and grow in the market. Weaknesses There is a high bargaining power of customers which put pressure and risk for this retailer of switching brand. 5
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Low profit margins in products and services can also create problems of lower profit. In order to attract customers it provides products at lower price which is good for some times bit not for the long term (SWOT Analysis of Sainsbury’s,2019). Increment in procurement cost, minimum wage rate, raw material cost and rising in cost of all other materials is other main weakness which is creating barriers. Opportunities It is stated that Sainsbury’s has made right expansion moves and it expanded its business in villages and rural areas and it gave opportunity to increase market share. Opportunity to cater all age group, gender, class of people is other main opportunity which can support it to improve image in the eyes of customers. Threats High intensity of competition in well-known brands and existing players like Tesco, Aldi and others is the biggest threat. High bargaining power of customers is other main threat. Threats of substitute products by small retailers and groceries can decrease market share and profit margin (FATRICIA, 2016). Recommendations From the above discussed strengths, weaknesses and all strategies used by Sainsbury’s it can be said that there is requirement of making some changes in strategies and other in order to reduce all weaknesses and threats. It is stated that there is a high intensity of competition in retail industry and it is becoming difficult for this retailer to make stable position. So, in this context, it can be recommended to this retailer that it should focus on penetration pricing strategy, it uses lower pricing strategy which is good and allows it to attract customers but on the other side it is decreasing its profit margin. So, as per the penetration pricing strategy, companies set their prices of products and services lower initially as per the market condition and as compare to competitors (Chen and Zhu, 2018). After that it raises prices of products as per the market condition and comparison of competitors. Other main strategy which needs to be focused by this company is it should buy laptops at affordable prices in order to maintain online sales and delivery of products in an 6
efficient manner. Lack of affordable laptops which are leading retailers and can also allow company to increase sales and profitability as well. It is stated that increment in prices of raw materials, wages and other can decrease its profit margins so, it can be said that company should buy raw materials in bulk if they do not scrap in some times. There are several raw materials who has long expiry dates so, buying all those products in bulk it can prevent itself against increases cost and by this it can increase its sales and profit margins. One of the other main weakness and threat is identified that customers in this sector has more bargaining power and they can switch brands whenever they need to change. It is important for this company to retain customers with the company for the long run and increasing loyalty as well. For this, it can be recommended that it should focus on providing benefits to customers like discounts, loyalty cards, coupons, bonus points, sale on some products, providing primes services and offers as like Amazon provides. By doing this, it can attract customers to the great extent, retain them and increase sales because customers feel valued and special when they receive such benefits (De Vries and Zhang, 2020). Action Plan It is one of the best way by company can make its self able to being in the market by reducing all weaknesses and becoming competitive. Making changes in offers and discounts in order to attract customers and make them feel valued. Providingeachinformationonofficialwebsiteandsolvingcustomersqueriesor grievance in a timely manner can help it out to become competitive. Providing post sale services to customers as Sainsbury’s offer electric products and people face difficulties in operating them so by providing 24*7 customers services it can retain customers (Agnihotri and et.al., 2017). By making changes in location as per the convenience of customers it can make changes. It is stated that it makes use of social media marketing but by more focusing on promotional campaign it can make customers aware about effectiveness of features of its products and services. 7
CONCLUSION From the above study it has been concluded that SWOT analysis tool played a vital role because it allows companies to analyse all internal factors and making changes in own strategies according to impacts of factors. It has also shown some trends of retail sector of the UK as what customers prefer and how their needs are getting changed, what are some factors associated with changes in economic and environmental factors etc. Further, it has also shown importance fo making an action plan as by which company can make changes in its strategies and take competitive advantages. 8
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REFERENCES Books and Journals Agnihotri, R. and et.al., 2017. Examining the role of sales-based CRM technology and social media use on post-sale service behaviors in India.Journal of Business Research.81. pp.144-154. Chen, F. and Zhu, D., 2018. Price Strategy and Network-Size Allocation Strategy in a Two- Sided Monopoly Market.Available at SSRN 3146878. Chhibber, P., 2019. Mentoring as a Practice for Nurturing the Personnel Performance a Study on Retail Sector.Journal of the Gujarat Research Society.21(8s). pp.663-673. De Vries, E.L. and Zhang, S., 2020. The effectiveness of random discounts for migrating customers to the mobile channel.Journal of Business Research,110, pp.272-281. FATRICIA, R.S., 2016. SWOT ANALYSIS OF SAINSBURY’S SUPERMARKET.Jurnal Manajemen Terapan dan Keuangan.5(1). Jiang, R. and et.al., 2018. A SWOT analysis for promoting off-site construction under the backdrop of China’s new urbanisation.Journal of cleaner production.173. pp.225-234. Online SWOTAnalysisofSainsbury’s.2019.[Online].Availablethrough <https://www.marketing91.com/swot-analysis-of-sainsbury/> BackgroundofSainsbury’s.2018.[Online].Availablethrough< https://www.about.sainsburys.co.uk/about-us/our-business-strategy> Retailtrends.2020.[Online].Availablethrough< https://www2.deloitte.com/uk/en/pages/consumer-business/articles/retail-trends.html> TopRetailTrend.2020.[Online].Availablethrough< https://www.retailgazette.co.uk/blog/2020/01/top-retail-trends-to-expect-in-the-roaring- 2020s/> Digital will Continue to Disrupt Physical Retail in the UK.2020. [Online]. Available through < https://www.emarketer.com/content/digital-will-continue-to-disrupt-physical-retail-in- the-uk/> 9