FY028: Analysis of Retail Trends and Tesco's Performance

This report, prepared for the FY028 Inquiry Based Learning module, delves into the current trends within the retail industry, with a specific focus on the UK market and the impact of online shopping. It begins by examining the rise of e-commerce, consumer behavior, and the shift towards digital platforms. The report then provides a detailed analysis of Tesco, a major player in the UK retail sector, evaluating its response to these trends, including its expansion of online services and strategies for adapting to changing consumer demands. Furthermore, it provides recommendations for Tesco, including rebranding, supply chain innovation, product development, and leveraging consumer preferences to maintain a competitive edge in the evolving retail landscape. The analysis is supported by data and statistics on market growth, consumer spending, and Tesco's performance metrics. This report is valuable for students studying business development, marketing, and retail management.

FY028: - Inquiry Based Learning
(CW1)

TABLE OF CONTENTS
INTRODUCTION......................................................................................................................3
Trends in retail.......................................................................................................................3
Analysis of the organization...................................................................................................4
Recommendation....................................................................................................................5
CONCLUSION..........................................................................................................................7
REFERENCES...........................................................................................................................8

INTRODUCTION
The retail industry is expanding at a higher rate and this report is based upon the
retail industry. For this report Tesco is taken as an organization which is a retail giant and it
covers analysing the trends in retail pertaining to the online shopping and then analysing the
organization and forming recommendations.
Trends in retail
Online shopping has become a daily activity for millions of consumers in UK. The
UK buyers have extraordinary expectations with regards to conveyance speed, client
experience and smooth return policies. It is projected that the revenue in the UK e-commerce
is projected to reach £80,678 million in the year 2021. The revenue will be growing at an
annual growth rate of 3.5% for 2021-2025. As per Statista, in UK, 55% of the population
shops online and most of the preferred item is clothes and sports goods. In addition to this,
32% of the online shoppers also purchased deliveries form the restaurants and the catering
services. The items which were least purchase by online consumers were bicycles, moped,
cars while only 10% of the households prefers to buy them online (E-commerce in the United
Kingdom (UK) - Statistics & Facts. 2020). In the year 2020, the retail e-commerce sales of
UK set a record of total USD $180.39 bn in sales which is only third behind China. There has
been a support or reinforcement of digital shopping patterns among UK customers, more than
65 and something else, as the year has advanced. As indicated by a September 2020 report
from ChannelAdvisor, the aim to shop online has become stronger even if the shops had
opened once again. In May 2020, during the stature of lockdown, 42% of UK online
purchasers said they would like to do shopping online more in the coming future. By August,
the month after not so essential stores resumed and opened, that extent had increased to 55%.
As per the poll done by ChannelAdvisor, the people who have bought items online
in the past 6 months has resulted into increase in the response rates for the shopping online.
Also, this online shopping has remained a significant trend in the year 2020 with number of
consumers of 45.4 mn being online buyers in UK which accounts for nearly 81.1 per cent of
the population. It can be clearly seen that there is a digital shift coming within the retail sector
at a faster pace (Nash, 2019). UK is considered as the most advanced e-commerce market in
Europe and in the year 2018, the amount increased to 688.4 bn GBP which was a sharp hike
in comparison to the previous year. on the sectorial basis, the wholesale and the
manufacturing were the sectors which generated higher e-commerce sales in the same year.

In the retail area, where the UK leads the way in Europe, was the answer for around
8% of online business deals across all the sectors. In the retail area itself, online deals
established 19.4 percent of all retail in 2019, and is estimate to arrive at more significant
levels before long due prone to the effect of the Covid pandemic (Ramanathan and et.al.,
2017). In 2019, web retail deals had developed by just 10.1 percent, the slowest rate recorded
in the last 10 years. Online based retailing had specific load in material and dressing stores,
with the latest legislative figures stating more than one-fourth of retail deals are coming from
online channels.
In numerous business sectors in Europe, mobile trade and shoppers are coming first
within e-commerce business. In Great Britain, as well, the portion of smart phone users who
used to do shopping by means of phones, particularly the smart phones, expanded rapidly
over the years (Statistics on E-commerce in the United Kingdom in 2021. 2021). In addition
to this, the quantity of purchasers who utilized online mobile payment methods in their online
exchanges expanded, with a normal development of in excess of 2,000,000 additional clients
in 2019. The online shopping experience scenario of UK in retail is getting more enriched as
more and more consumers are adapting the method of making online purchases. In 2020,
nearly 87% of the households have made purchases online within 1 year. The year 2020 has
been a biggest year for UK with consumers collectively spending 82 bn hours in the shopping
apps which is 30% rise from 2019. Retail apps like Amazon experienced 55% y-o-y growth
while Tesco groceries experienced 150% y-o-y growth and the largest increased faced by
Shein 490%.
Analysis of the organization
The one of the largest British retail, Tesco has saw an increase in the online
shopping by the consumers over the period of time. The retailer in order to effectively meet
with the demand has even doubled its capacity from 600,000 to 1.3 million weekly deliveries
slots in mere 5 weeks. The online sales have increased by 49% in the first quarter of 2020 and
is up more than 90 per cent in the month of May. Therefore, on an overall, the sales of the
group rosed to 8%. Along with that, a rapid expansion and development of its capacity has
resulted into pushing the Tesco’s online sales to 16 per cent from 9 per cent of its total UK
sales (Tesco sees strong online growth but stresses need to ‘plan for all eventualities’. 2021).
In addition to this, after the years of consumers moving to the heavy discount retailers like
Aldi and Lidl, Tesco has shown the sign of being fighting back in the recent times as
following its Aldi Price Match initiative, the organization has seen net switching of its
customers from Aldi for a time over decade. In addition to this, the Covid pandemic may

have boosted the deals for the grocery giants, in any case, alongside different retailers, it has
been compelled to spend more through the emergency. The organization expected entire year
retail operating benefit to be flat. Expenses have "significantly" expanded because of the
pandemic and Tesco said complete Covid related expenses for the entire year are relied upon
to be around £840 million. The £840 million costs will be partially mitigated by the UK
government business rates relief which would result into Tesco saving £532 million along
with extra food sales. In addition to this, Tesco is hoping its record Christmas results and the
3rd quarter trading to act as a platform continuous growth in 2021 when it comes to online
shopping and the delivery of services. The organization posted a sales growth of 8.1% with
an increase in the online sales up by 80% during the time of Christmas in comparison to the
last year. over 7,000,000 online orders were processed by Tesco over the time of holidays
which was equivalent to £1billion in sales.
Apart from this, the huge increase in online has been majorly driven by a rise in the
average basket size as the consumers likes to purchase as much as possible so that they do not
have to visit physical stores (Tesco online sales grow 48% during coronavirus lockdown.
2020). In addition to this, there has been upward trend in the Clubcard members with
additional 2 million users added and along with that nearly for 80% of the transactions, the
loyalty scheme used. The capacity of online shopping also increased from 350000 to 1.5
million in first week of January 2021 and Tesco has also promised that further improvement
will be made to the service and also pointed to the ongoing development and upgrading the
online system of click and collect facilities which is considered as the major area for growth.
This on-going pandemic is the major reason behind the increase in the usage of
online e-commerce site for the purpose of buying items without visiting the physicals stores.
In order to retain this demand and trend, Tesco has undertaken the strategies to gear up for all
the out-price war with the discounters which have taken its market share over the past 10
years. Tesco effectively identified the changing perception and preferences and behaviour of
the consumers which has helped it in undertaking the decision on the right time thus, taking
the competitive edge against the its rivals and became the first preference for the customer for
making online purchases. Therefore, it can be stated that Tesco has effectively met with the
changing requirements of the people through the way of expanding its online capacity. This
consequently led to attaining higher online sales growth in the retail sector and grabbing the
benefits of the pandemic.

Recommendation
Based upon the above analysis of the online retail trend and evaluating the
performance of the organization based upon it, there are certain points which is highly
recommended to organization which will help in attaining additional growth and
development of the business.
 The most important point which is will be very useful for the organization is
rebranding the products and services of the organization along with enhancing its
presence within the UK retail sector which can be considered as an opportunity for the
company. With the recent economic challenges which is being faced by the country,
the UK citizens are expected to appreciate the Tesco’s reasonable pricing strategy
along with the quality standards which it sets for its products. In addition to this
further diversification of the products along with the introduction of digital services is
needed. Having an option for creating an online application for suggestions will also
assist in improving the sped and quality of services.
 Apart from this, in order to reduce the risks and not to incur any losses in the future
the business entity can adopt a different approach towards handling its supply chain.
More particularly, an innovation driven strategy in the direction of information and
quality management required to be introduced. In addition to this, the organization
requires to be updated with its HRM strategies and the values in order to effectively
meet with its new standards for treating its employees and meeting with their needs.
 The company should make use of the product development strategy which is a
compelling option as the consumer demand is likely to change. The pandemic has
encouraged the people consume more at home rather then moving out for food and
thus, this resulted into increase in the demand for convenience foods and snacks
(Hosseini, Soltani and Mehdizadeh, 2018). Along with that, the reduced quantity and
volume of restaurants and take-away orders highlights a growing shift towards the
pre-packaged, ready to eat freezer meals which is being increasing preferred as a
means for reducing the time in kitchen. Thus, there is expected increase in the demand
of these food items in the future. Furthermore, there is likely to be a growing demand
pertaining to the non-perishable food items as the consumers are restricting their
regular visits for buying groceries to the market. Therefore, if the Tesco develops the
products which is effective in catering these specific demands and the increase in its
sales of own brand convenience foods, then it will help in achieving higher growth
significantly (Kiss and Barr, 2017). But this strategy faces certain challenges which

are similar to the market penetration in regard to getting the food to the consumers.
On the other hand, this strategy is seemed to be more feasible for the long-term
growth due to the reason it capitalises on Tesco’s existing research and development
costs in respect to the product development.
When the recommended changes are coordinated into the organization's plan, Tesco
will actually to able to address the issues brought about by the current social,
monetary, and economic concerns which is being saws inside the state.
CONCLUSION
It can be inferred from the above, that there is huge potential for market growth in
respect to the online shopping in the retail sector. Tesco has been able to effectively identify
the opportunities available in the market which has supported it in maintaining a good
position in the market. The initiatives undertaken by Tesco during the time of pandemic has
been very useful for it in terms of attracting greater benefits and taking the competitive edge
in the market. There are certain suggestions which are being made for Tesco which if
implemented would be helpful in attaining the greater degree of profits and the market share.

REFERENCES
Books and Journals
Hosseini, A. S., Soltani, S. and Mehdizadeh, M., 2018. Competitive advantage and its impact
on new product development strategy (Case study: Toos Nirro technical
firm). Journal of Open Innovation: Technology, Market, and Complexity. 4(2). p.17.
Kiss, A. N. and Barr, P. S., 2017. New product development strategy implementation
duration and new venture performance: A contingency-based perspective. Journal of
Management. 43(4). pp.1185-1210.
Nash, J., 2019. Exploring how social media platforms influence fashion consumer decisions
in the UK retail sector. Journal of Fashion Marketing and Management: An
International Journal.
Ramanathan, U., and et.al., 2017. Impact of customer loyalty and service operations on
customer behaviour and firm performance: empirical evidence from UK retail
sector. Production Planning & Control. 28(6-8). pp.478-488.
Online
E-commerce in the United Kingdom (UK) - Statistics & Facts. 2020. [Online]. Available
Through:< https://www.statista.com/topics/2333/e-commerce-in-the-united-
kingdom/#topicHeader__wrapper>.
Statistics on E-commerce in the United Kingdom in 2021. 2021. [Online]. Available
Through:< https://osome.com/uk/blog/2021-ecommerce-trends/#:~:text=In%20the
%20UK%2C%202020%20was,with%20a%20490%25%20YoY%20growth.>.
Tesco online sales grow 48% during coronavirus lockdown. 2020. [Online]. Available
Through:< https://www.insider.co.uk/company-results-forecasts/tesco-online-sales-
grow-48-22255555>.
Tesco sees strong online growth but stresses need to ‘plan for all eventualities’. 2021.
[Online]. Available Through:< https://www.marketingweek.com/tesco-sees-strong-
online-growth-but-is-planning-for-all-eventualities/>.