Retail Sector Analysis: UK Market Overview (Fall 2023)

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BUSINESS ESSENTIALS

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Table of Contents
Task 1: Poster..................................................................................................................3
Identify the business sector..............................................................................................3
Major Players................................................................................................................... 3
Major forces affecting the sector......................................................................................4
Porter’s Five Forces:........................................................................................................5
Market size and structure.................................................................................................7
Nature of the market sector..............................................................................................8
Key issues........................................................................................................................9
Reference List:............................................................................................................... 11

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Task 1: Poster
Identify the business sector
The Retail Sector of the United Kingdom will be taken into consideration as it is one of
the most active and competent sectors in the midst of the country, which allows
extensive revenues to the country's GDP. The retail market is growing ever since and
within the last 5 years; there has been an increase in 50 million Euros. The current retail
market in the United Kingdom is worth 4440521.9 million Euros and it is expected to be
around 452942.9 million Euros in 2020. Almost 2.9 million people are employed in the
retail market of the United Kingdom and the proportion of spending is nearly ⅓. 18% of
the people have made retail services online and there has been a growth of 4% in the
current year (Wood and Reynolds, 2013). The total number of the retail outlets has
been recorded as 299415 and the total number of that registered retailers has been
calculated to 201915. 5% of the overall GDP is provided by the retail sector and 15%
growth in the online retail sales is seen every year.
Major Players
Tesco: Tesco PLC is the leading British multinational company having its headquarters
in Welwyn Garden city, Hertfordshire, England, United Kingdom. It is the third largest
retailer in the world according to the gross revenues, and is a public limited company.
The founder of the company is Jack Cohen and has almost 6800 shops around the
world. The revenue of the company is around 63911 million pounds and the net income
is nearly 1320 million pounds. The company has 450000 employees (Tesco plc, 2019).
Sainsbury’s: Sainsbury's is the second largest chain of supermarkets in the United
Kingdom and it is a public limited company having more than 15.3 % of the supermarket
share. The company has its headquarters in London, United Kingdom, and has 1415
shops around the world. It usually works in the United Kingdom and has 186900
employees working for the company. The revenue is nearly 28.45 billion pounds and

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has a net income of 309 million pounds. The CEO is Mike Coupe
(About.sainsburys.co.uk, 2019).
Wal-Mart: Walmart is an American multinational retail corporation, which operates in
the United Kingdom with the name of ASDA and has its headquarters in Arkansas, the
United States. Asda is the third-largest British Supermarket retailer, which have its
headquarters in Leeds, West Yorkshire. The company is a subsidiary company and
operates in 633 locations in the country. The company specialises in grocery and
general merchandise and has revenue of 21666 million pounds and an operating
income of 791.7 million pounds. The company has 165000 employees working and the
company is well known for its financial services (Corporate.asda.com, 2019).
Major forces affecting the sector
Political conditions: The government policies of the United Kingdom is affecting
adversely the profitability and revenue of the retail companies and the legislation are
also having an impact on international trade, the consumer habits and the economy of
the country. The political regulations have to be abided by the companies and it is
extensively affecting the regulations while the products are exported, imported and sold
in stores. The health guidelines have also become intense and legal troubles are
increasing day by day (Evans, 2015). The antitrust issues and data breaches are the
factors for which the government is taking essential steps and is introducing laws and
regulations that have to be avoided by every company.
Economic factors: The amount of sales is increasing day by day and is allowing the
customers to buy whatever they want, which is also increasing the profitability of the
stores, allowing the investors to become interested in these companies. The
unemployment rates are high, and affected the current market adversely (Pantano,
2014). Even the retail market is facing a recession and the customers have a more
disposable income on the frivolous products. The economic is getting poor and the
customers and not able to afford all kinds of purchases.

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Social conditions: One of the major factors that are affecting the retail industry is the
customer preferences as the demand of the companies is continuously changing.
People have started to buy products in bulk and like to choose from a store, which has
all kind of options like electronics, food product, clothing and all in large quantities.
Therefore, there has been a need for companies to use market research to understand
the changes in the customer behavior (Varley, 2014). People are also becoming aware
of the product and services offered by the companies and choose products that are low
in cost but high in quality. These people have also started to buy healthy food products
and companies investing more in CSR are having more sales than other companies
are.
Technology: One of the technological factors introduced is the point of self-system that
is allowing every company is to manage the monetary activity and easy browsing within
the store (Capacci and Mazzocchi, 2011). Many companies have also used new
systems like iPads and mobile internet facility so that it can reach larger audiences and
streamline the services.
Porter’s Five Forces:
The threat of substitutes: The threat of substitute for food products is low while for
food items, it is medium to high. The substitutes include almost the same products
provided by the other suppliers, except for the products manufactured by the company
itself. Most of the companies have similar products, especially, the clothing products are
very much similar and therefore, the threat of substitutes is high (Potter et al., 2017).
The threat of new entrants: The retail market of the United Kingdom is becoming
saturated day by day, and therefore, it is becoming hard for the new competitors to
survive in the market. However, many companies have started to operate in the market
for which the major players are being affected extensively (Neupane, 2015). Therefore,
it can be said that the threat of new entrants is moderate as the companies have to be
very much competitive and have enough goodwill to deal with the competition with the
best players like Tesco, Asda, Sainsburys and Morrisons.

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Industry rivalry: The market of the United Kingdom is extremely competitive in the food
and grocery retail industry, and this is because of the large number of companies
existing in the industry. Most of the companies are continuously competing over the
prices, promotions and products, and some companies like Asda has been able to
increase the market share from 16.6% to 17.2% within 2 years. Moreover, the
company's existing in the industry faces a stagnant market growth, which also
intensifies the market rivalry (Benson et al., 2018).
Bargaining power of the buyers: The bargaining power of the buyers is very high and
the switching cost is low, which allows the buyers to switch from one brand to another.
This is because all the companies differentiate the products through either services or
making the products more standardized. Most of the customers are attracted to low
prices, and therefore, the customers tend to shift from one company to another when
the prices are high (Thompson and McLarney, 2017). Online shopping has also been a
good alternative as it provides with low prices, for which many customers are opting for
this option too.
Bargaining power of the suppliers: The bargaining power of the suppliers is very low
as the companies in the industry can choose the product from other suppliers whenever
they can. Most of the suppliers are inclined towards maintaining their position and
keeping their business contracts with the large supermarket companies and therefore, it
is also possible for the companies to get the lowest possible prices from the suppliers.

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Market size and structure
Figure 1: UK Retail Market size and structure
(Source: Retaileconomics.co.uk, 2019)
Figure 2: UK Retail Market size and structure
(Source: Hoang et al., 2019)

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Figure 3: Geographical Distribution of Retail GVA (2018)
(Source: Hoang et al., 2019)
Nature of the market sector
The retail business has been divided into several categories on the basis of margin and
turnover, and this framework is used for the development and planning of retailing
strategy. The turnover and the margin are the key parameters and the success of the
companies depends on these parameters. The margin can be defined as the
percentage, which is left after the inventory in the retail store is sold and turnover can be
defined as the number of times the average inventory is sold in a year (Fofana and

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Jaffry, 2015). Some companies like Tesco, Walmart and Aldi has a low margin while it
has high turnover and this is because they try to provide the customers with low prices
but with a wide variety of product. These companies have a variety of FMCG products
and the stores are generally located nearby to where the customers are (Neupane,
2015).
Some of the companies have high margin and low turnover and these stores
exceptionally have a distinctive merchandise or a specialised sales approach. Some of
the companies like Armani, Marks and Spencer and Omega belong to this category and
they tend to provide products above the market price (Evans, 2015). These companies
sell explicit services and classes of products that are established in selected areas.
Some of the companies are able to maintain high margin and high turnover and this
kind of stores have narrow lines of items that are specially located in non-commercial
locations. These types of companies provide the customers with high prices but also
ensure good quality products so that they can maintain profitability and convenience.
Very few companies exist in the group where there is low margin and low turnover and
these types of stores are specially the new entrants (Varley, 2014). They try to maintain
penetrative policies to enter the market. They have a competitive and low price and the
sales volume is also low, most of the companies are located poorly and they face
difficulty to survive in the market.
Key issues
One of the key issues faced by the retail industry of the United Kingdom is the ever-
changing customer expectations, and the companies are facing extensive problems to
keep up with the demands of the customers and make possible changes to adjust with
the seasonal trend of the customer shopping behaviour. It is important for every
company in the retail industry of the United Kingdom to provide the customers with good
experiences so that they can create brand loyalty and avoid common mistakes, which
can help to sustain the business growth (Fofana and Jaffry, 2015). Therefore,
maintaining customer loyalty is also a challenge for the companies and they have to
invest extensively on special offers and promotions to keep the customers loyal. All the

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companies in the retail industry have a large number of employees and therefore, it
becomes very hard for the companies to manage internal communication.
The complex operations within the organisations increase the problem of internal
communication, and it is necessary to deal with the challenges so that there is no
disruption in the business processes. Most of the companies face high employee
turnover rates and it is one of the toughest challenges in the industry (Fontana et al.,
2019). Therefore, the company has to invest a lot of money and energy on replacing
employees or to increase employee engagement to optimise the competencies. Finally,
the companies also face a problem with the digital disruption for which the company will
have to invest on different technologies so that proper information can be provided to
customers and their experience can be enhanced.

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Reference List:
About.sainsburys.co.uk. (2019). Welcome to Sainsburys Home. [online] Available at:
https://about.sainsburys.co.uk/?_ga=2.174098405.69444733.1562675173-
1193623171.1562675173 [Accessed 9 Jul. 2019].
Benson, M., Hirst, C. and Beresford, P., 2018. The changing role of the Category
Captain in UK grocery retail market. Recent Advances in Retailing and Services
Science.
Capacci, S. and Mazzocchi, M., 2011. Five-a-day, a price to pay: an evaluation of the
UK program impact accounting for market forces. Journal of health economics, 30(1),
pp.87-98.
Corporate.asda.com. (2019). Asda Blogs and Stories - ASDA Corporate. [online]
Available at: https://corporate.asda.com/blog?cmpid=ahc-_-otc-corp-_-asdacom-_-hp-_-
footer-_-about-blogs-stories [Accessed 9 Jul. 2019].
Evans, S., 2015. Juggling on the line: Front line managers and their management of
human resources in the retail industry. Employee Relations, 37(4), pp.459-474.
Fofana, A. and Jaffry, S., 2015. Assessing retail market competition for multi-
aquaculture products. Journal of Economic Studies, 42(3), pp.462-476.
Fontana, M., Iori, M. and Nava, C.R., 2019. Switching behavior in the retail market:
Logistic and mixed effect Bayesian estimations of consumer choice. Energy policy, 129,
pp.339-351.
Hoang, D., Barnes, C. and Munroe, O., 2019. Management of traditional retail markets
in the UK: comparative case studies. International Journal of Retail & Distribution
Management, 47(5), pp.530-551.
Neupane, R., 2015. The effects of brand image on customer satisfaction and loyalty
intention in retail super market chain UK. International Journal of Social Sciences and
Management, 2(1), pp.9-26.

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Pantano, E., 2014. Innovation drivers in retail industry. International Journal of
Information Management, 34(3), pp.344-350.
Potter, A., Mason, R. and Lalwani, C., 2017. Analysis of factory gate pricing in the UK
grocery supply chain. International Journal of Retail & Distribution Management, 35(10),
pp.821-834.
Retaileconomics.co.uk. (2019). UK Retail Stats and Facts | Retail Economics. [online]
Available at: https://www.retaileconomics.co.uk/library-retail-stats-and-facts [Accessed 9
Jul. 2019].
Tesco plc. (2019). Tesco PLC. [online] Available at: https://www.tescoplc.com/
[Accessed 9 Jul. 2019].
Thompson, J. and McLarney, C., 2017. What effects will the strategy changes
undertaken by next Plc have on themselves and their competition in the UK Clothing
Retail Market?. Journal of Commerce and Management Thought, 8(2), p.234.
Varley, R., 2014. Retail product management: buying and merchandising. Routledge.
Wood, S. and Reynolds, J., 2013. Knowledge management, organisational learning and
memory in UK retail network planning. The Service Industries Journal, 33(2), pp.150-
170.