Feasibility Study: Analysis of IA 24/7 Shop in the UK Grocery Market

This feasibility study examines the potential of an IA 24/7 shop in the UK grocery market. The report begins with an introduction to the growing grocery sector and the opportunity for a 24/7 convenience store. It then analyzes the macro market, including political, economic, social, and technological factors, and the macro and micro industry landscapes, including competitors like Tesco and Sainsbury's. The study details the proposed shop's location, convenience factors, pricing, and financial projections, including break-even analysis and payback period. The study also includes recommendations and a reflection on the overall feasibility of the venture, concluding that the business is feasible. The report also includes references and supporting financial data.

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Contents
1.0 Introduction.........................................................................................................................................3
2.0 Macro Market......................................................................................................................................5
2.1 Political............................................................................................................................................5
2.2 Economic.........................................................................................................................................6
2.2.1 GDP..........................................................................................................................................6
2.3 Social...............................................................................................................................................6
2.4 Technological..................................................................................................................................7
3.0 Macro industry................................................................................................................................7
4.0 Micro industry.....................................................................................................................................9
5.0 Finances............................................................................................................................................10
6.0 Recommendations...........................................................................................................................10
7.0 Reflection..........................................................................................................................................11
8.0 Conclusion.........................................................................................................................................11
References..............................................................................................................................................12

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1.0 Introduction
The grocery sector particularly in the UK continues to grow and exhibits lucrative
opportunities for investors to venture. It is estimated that there are more than 90000
grocery stores and more than 3 million individuals are employed in the grocery industry
(Kantar Worldpanel, n.d.). With the establishment of IA 24/7, the supermarket will
provide grocery products in the UK particularly in Southampton where there is a good
market for grocery products. The shop will serve the needs of people round the clock,
and customers do not have to worry about getting the supermarket closed. This
surfaces amidst concerns where most supermarkets operate within specific time frames
denying consumers the luxury of shopping at night. According to IGD, the food and
grocery market is expected to grow by more than 15% by 2022 valuing it at the tune of
£213 billion (IGD, 2019). The grocery industry continues to exhibit good health spurred
by festivities such as Valentine that focus on serving ready meals. The four big retailers
continued portraying positive growth where Tesco and Morrisons were marked as the
fastest growing as their sales were clocked at 2.7%. Tesco’s dominance of the grocery
industry in the UK remained robust with Sainsbury’s a competitor recording a 0.3% drop
in market share, Asda market share dropped by 0.1% (Jahshan, 2018). Thus, the
grocery industry is a highly contested market and requires innovation to remain
successful. However, there are many available opportunities to be exploited.

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2.0 Macro Market
2.1 Political
It has been found that a substantial percentage of food bought by consumers in
the UK faces the risk of disruption following a no-deal Brexit scenario. More than 60% of
all fresh food is imported mainly from the European Union. Spain exports more than
46% of the raw food while the Netherlands exports 22% of the fresh food. It is thus clear
that more than 50% of all the food consumed in the UK it is indeed imported with more
than 30% originating from the European Union. Shoppers have begun demonstrating
signs of concerns particularly the recessionary behaviors that had been evidenced in

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2008 have surfaced. With sluggishness of out of home eating, stagnation of purchases
with regards to health food segments and increases of packed lunches all signify the
nervousness that shoppers have developed recently. It has been found out that 80% of
the shoppers in the UK are skeptical about prices with regards to supermarket food in
the case of a no-deal Brexit.
2.2 Economic
2.2.1 GDP
Using 2014 as the base year, GDP had declined from 3022.83 in 2014 to 2622 in
2017. A fall in GDP translates to a fall in consumers’ disposable income. However, the
government has put in place mechanisms to avoid the UK falling back into a recession
that was witnessed between 2008-2009.UK also a low unemployment which is an
indicator that gives confidence to consumers regarding the economic situation such that
the purchasing power of consumers may rise. However, individuals prefer eating in their
homes compared to having their meals in the restaurant due to looming uncertainty in
the economy. Thus, the amount of money spent on foods and related commodities rises
steadily. Consequently, a decline in consumers’ disposable income has made people
reluctant to buy goods of ostentation such as video games.
2.3 Social
Population
As of 2010, the population of the UK had increased, and it was said that the
number of individuals in the UK was approximately 62 million. Regarding gender, it is

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said that there are more women than men mainly attributed to the fact that women
exhibit longer life expectancy. However, the growth of the population is low due to the
aging population primarily evident in the UK. The aging population is one factor that
could be employed by retailers to restructure their target audience to ensure that the
needs of the aging consumers are also catered for.
The social trends impact cooking and eating behaviors with the inclusion of the
increasing number of women working, rise in the number of households for single
people, increased exposure to exotic cuisines and increase in demand for luxury time.
Some individuals prioritize food as an essential part of their social life where they enjoy
preparing tasty meals and enjoying such meals with their colleagues. However, for
others it as an individual task considered as a refueling exercise that is dispensed while
the individual is doing other chores. Following the post-war epoch, a substantial amount
of money was spent on foods in the UK and has been on the rising since then.
However, there has been a move to consume expensive foods with butter, meat, eggs
and cheese and declining demand for items such as potato and flour. Such a trend has
repercussion for other foods.
2.4 Technological
Significant investment in the development of technology in the food industry is
perceived as a luxury as the sector entails small and medium-sized enterprises that
may not afford such substantial investment expenses. However, significant, milestones
in information technology have enabled committed suppliers in the food industry to
create innovative products and services such as the use of loyalty cards to purchase
grocery products in supermarkets. Such innovations have improved the quality of
products, improved productivity and profitability of the companies involved. Leading
supermarkets in the UK such as Tesco and Sainsbury’s have relied on technology to
establish an online retail enterprise that has enabled such supermarkets to improve
their share of the market as well as profits.
3.0 Macro industry
The grocery industry has become competitive recently and is a perfect illustration
of oligopoly developing to become more competitive. With the increasing strength of
discount giants such as Aldi and Lidl, the have led to shaking up of the market and
diluted the former oligopoly that was enjoyed by giants such as Tesco and Sainsbury.

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Also, there is a growing interest in pound shops that are gaining a share of the market
driving away from the margins previously enjoyed by the leading UK supermarkets.
From the consumers’ side, it has become good news due to reduced prices, small profit
margins and a bundle of incentives from the supermarkets aiming to maintain their
share of the market. The industry with regards to supermarkets has become highly
contestable with few barriers regarding setting up a new superstore. The shift to small
convenient regional stores has made the process of establishing new domestic
supermarkets easier.
Asda
The supermarket is a fully owned subsidiary affiliated to Walmart following the
1999 acquisition. ASDA has more than 600 retail outlets, and 190 are supermarkets.
ASDA also runs big format superstores that sell items such as clothing and furniture
apart from the groceries. The competitive strategy adopted by ASDA focuses on
maintaining the lowest prices available among the dubbed big four grocers in the UK.
ASDA also has been reported to be seen renovating its store layouts and online sales
platform to align with the evolving shopping behavior among the consumers. Asda is
investing in providing good quality with regards to the nutritional value of its private label
commodities.
Sainsbury’s
The supermarket has been ranked as the third largest supermarket in the UK
particularly in the grocery stores. Sainsbury’s has more than 1300 locations with half of
them serving as supermarkets and the other half serving as convenience formats.
Based on customer surveys. Sainsbury’s is ranked as the grocer that has the highest
quality in its stores. Thus, Sainsbury’s uses this strategy to charge a premium price for
its grocery commodities through reduction of price has become its new competitive
strategy. In attracting more customers, the supermarket is experiment with various store
layouts increasing its product offerings to capture merchandise types and also
promoting the in-store with regards to banking services.

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4.0 Micro industry
The I A 24/7 shop will be located in small towns across the UK and also in major
towns; this will ensure that it caters for the needs of people who are from large cities
that have supermarkets bringing the services to the door of most consumers. The
supermarket will also be convenient as customers will have the option of ordering online
and having deliveries delivered in their homes at a small fee to cover transport costs.
This will be crucial in catering for the segment that prefers products offered at their
homes as they have many commitments that prevent them from shopping. The
supermarket will also be accepting credit cards to save people the hustle of carrying
cash. The prices charged will be affordable as the supermarket will be purchasing
commodities directly from producers eliminating the costs associated with
intermediaries. Such low prices will aim at attracting the market segment comprising
mostly the students who have limited funds, yet they are potential customers. I A 24/7

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also understands the needs of students and as such will offer discounts to encourage
both impulse and bulk buying.
5.0 Finances
BREAKEVEN
Annual income for breakeven Projected yearly income
Price per unit sale £ 12.00 number of people in Southampton
less raw materials(30%) £ 3.60 number of people in the target market(le
Contribution £ 8.40
Fixed costs(one year) £ 800,000.00 no.of people have promised to purchase(
add contribution £ 8.40
units required yearly £ 200,000.00 people judged to buy(40%)
total weeks in a year 50
weekly income required to break even £ 4,000.00 frequency of purchasing ten days
Retail price £ 12.00 no.of people that will purchase frequentl
weekly income required £ 48,000.00 approximation of those individuals
no of weeks annually 50 retail price
annual income needed for break even £ 2,400,000.00 Days in a week (7)
no.weeks in a year
projected annual income
yearly income required to break even
projected income annually
for n months in a year n months in a year
approximation
Break even
The financial aspect is necessary for a start-up. In this case, part of the money
will be sought for financial investors and part of savings. Approximately 1,000,000 will
be needed for the start-up to fill the stocks of mainly grocery products.4,000,000 will be
used for packaging the grocery. One strength associated with this venture is that it
requires less than £ 1 million to start from scratch. The business will be funded by the
100 group members where each will provide £10000 each, and in exchange, they will
get 10% of the enterprise share. The third rule has been accepted here as it facilitates
forecasting of the payback and break-even analysis. The payback period has been
capped at four months; however, through the break-even analysis, the break-even is 19

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months with annual revenue of £ 3,780,000.00. This is taking note that when the
business is starting, there may not be enough sales made. Due to unavoidable
circumstances, a contingency fund of £ 100,000 will be set aside to take care of
anything that might go South. When all these factors are put into consideration, it would
be fair to assert that the venture has a high payback period and also the break even.
PAYBACK
Fixed costs(6 months)
£
550,000.00
add
Contingency(10%)
£
55,000.00
£
605,000.00
£
605,000.00
add Revenue(1
month)
£
140,000.00
4.32142
9
Payback 4 months
6.0 Recommendations
The experience associated with conducting the general feasibility was excellent.
In general, the venture is feasible as it will be better positioned to make profits after 19
months and an estimated payback of four months. Individually, such a business is
recommendable since there are no significant barriers associated with entry as the
investment is manageable as well as the cost of operation. Also, with the rising trend for
healthy grocery products among consumers and the rise of health-conscious
consumers, then it can be concluded that there is a high likelihood of opportunities for
the venture to grow and expand
Such a business prospect is viable and will be able to generate revenues and
profits in the next 18 months and has a payback period of 4 months with an internal rate
of return of 12%. Such a business is recommendable as there are no barriers to entry
and this is the reason that supermarkets are picking up in the UK. However, initial costs
are high due to funds needed in renting and purchasing the required products. Also, the
change of habits where many people prefer preparing food for themselves and the

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rising number of students in the UK shows that indeed that the market for grocery
products will increase in the future.
7.0 Reflection
It is through this feasibility that I have to note of the elements and resources
required for a start-up. While some parts such as the finance proved difficult, others
such as the macro and micro were fascinating, and the course itself has imbued me
with skills and increased my knowledge regarding start-ups. I now consider taking this in
my future career plan and build a profession out of this, as there are many
opportunities.
8.0 Conclusion
It is evident from the above feasibility that indeed the UK provides a massive
market for grocery products, and this is an area that future businesses should exploit
due to the growing demand for health foods and an increasing proportion of health-
conscious consumers. With IA 24/7, it will not only provide healthy grocery products but
will also strive to provide quality services aiming the students in the UK universities, the
household, and other stakeholders.
References
IGD, 2019. UK Food and Grocery. [Online]
Available at: https://www.igd.com/Portals/0/Downloads/Infographics/UK-food-and-

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grocery.pdf
[Accessed 24 April 2019].
Jahshan, E., 2018. UK grocery market “remains in good health” as Big 4 enjoy growth.
[Online]
Available at: https://www.retailgazette.co.uk/blog/2018/03/grocery-market-remains-
good-health-thanks-valentines-day-chinese-new-year/
[Accessed 24 April 2019].
Kantar Worldpanel, n.d. Market share of grocery stores in Great Britain from August
2012 to August 2018. [Online]
Available at: https://www.statista.com/statistics/300656/grocery-market-share-in-great-
britain-year-on-year-comparison/.
[Accessed 24 April 2019].