Retail Theory and Practice

RETAIL THEORY
AND PRACTICE

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Key relevant changes in the UK grocery market........................................................................1
Grocery Retail UK:.....................................................................................................................1
PESTEL analysis of UK grocery market:...................................................................................1
Factors of micro-environment that drives the UK grocery market.............................................3
TASK 2............................................................................................................................................5
Strategies and tactics that could be used by the retailer..............................................................5
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................8

INTRODUCTION
Retail industry is one of the highly competitive industry of the UK. This is because in it
number of business firms are operating like Tesco, Sainsbury, Lidl and Aldi. All these firms are
competing with each other on the basis of price. Changes in the business environment greatly
influence profitability of the business firms. In the present report, changes that happened in the
grocery business are discussed in detail. Along with this, PESTEL analysis is also done by using
which threats and challenges faced by the business firms are identified. In middle part of the
report, strategy is formulated by using which firm can maintain its growth in the industry. At end
of the report, conclusion section is prepared.
TASK 1
Key relevant changes in the UK grocery market
Grocery Retail UK:
The UK grocery market is highly diverse, with a wide range of formats, from
convenience stores to hypermarkets, warehouse clubs and online stores. According to Planet
Retail's data, the market is currently led by five grocers (Tesco, Sainsbury, Asda/Walmart,
Morrisons and the Cooperative Group), accounting for almost 55% of grocery retail banner sales,
while the remaining 45% is attributed to hundreds of outlets scattered throughout the country
(Clegg, Kornberger and Pitsis, 2015). Over the years, large players have continued to expand,
both in terms of size, product range and services, increasingly taking market share from their
smaller competitors.
The large player of food retail industry in UK is Tesco. Each retail chain focuses on
specific market segments. Tesco targets the middle market, providing both economy and upscale
products.
PESTEL analysis of UK grocery market:
PESTEL analysis considers six factors which helps to the business entity that what are
various changes occurs in the grocery market of UK. The six factors are such as political,
economic, social, technological, environmental and legal factors (Ridley-Duff and Bull, 2015).
In the report the Tesco company is chosen which is a large or multinational food retailing
company, is headquartered in the UK and has stores in 12 countries across the world. Tesco
known for selling food and non-food products both.
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1. Political Factors: Political factors influencing the UK grocery industry are issues resulting
from actual politics that can have an impact on the entire country. These include tax rates, acts of
legislation and of course, the stability of the country. Very first political factors which impacts to
the grocery market is Scotland independent. UK retailers and Tesco have already responded to
this with concern stating that it could lead to issues with supply chain, pension laws and the
added administration costs that would be needed would result in higher prices of consumers.
Another political factor is the possibility of the UK leaving the EU (Blay-Palmer, 2016). This
could have rather large impact on the industry since leaving the EU also means leaving the trade
zone. It could also mean an increase in cost when purchasing from other European countries.
2. Economic Factors: The economic factors influencing the UK supermarket are largely
resulting from the current economic state of UK. There has been a noticeable food price inflation
throughout 2013. This inflation is outpacing wage growth thus making effect of the economic
recovery rather unapparent for both the UK grocery market and UK households.
Increase in fuel prices also have an impact on UK grocery market because it keeps
customers from shopping larger out-of-town stores to save on fuel prices (Mertzger, 2014).
Another factor influencing is high value of real estate held by grocery market retailers and Tesco
food retailer than well. Most UK supermarket chains own two thirds of their stores as free holds,
Wm Morrisons even holds 90%. Numbers show that this leaves major supermarkets such as
Tesco trading below the value of their property.
3. Social Factors: Due to a variety of social changes, trends indicate that customers in the UK
have moved towards bulk shopping and one-stop shopping. One of the factors that fall under the
category general buying habits in tradition. Tradition can play a big role for customers pin
deciding where they do their food shopping (Fetscherin, 2015). Corporate responsibility is an
interesting factor when it comes to the effect it has on consumer behaviour of the market. A
positive CSR image can improve financial performance which would suggest that consumers are
influenced. Online food shopping has also become an increasingly popular way of shopping. The
current economic situation has had a great impact on consumer behaviour in terms of shopping
habits. The average shopper's disposable income continues to reduce, putting a lot of pressure on
their household budget.
4. Technological Factors: Technological factors influencing the UK supermarket industry
mainly result from innovation and the need for supermarkets to keep up with these innovations to
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