The battle of the supermarkets is one of the hardest-fought and most-publicised contests of our time. A recent report by Claritas on the grocery shopping habits of British consumers says that in the Nineties the UK retail food sales increased by over 30 per cent. Annual profits for the superstore chains are now in excess of &£500m.
The top five UK supermarket chains command a cumulative market share that outweighs their equivalents in both the US and mainland Europe by a huge margin. Little wonder then that both the UK Competition Commission and the Office of Fair Trading (OFT) keep such a watchful eye on our market leaders.
Tesco has the highest reported market share (Taylor Nelson Sofres) and the report from Claritas finds that 51.5 per cent of respondents shop at Tesco, putting it significantly in front of its key competitors, Sainsbury’s and Asda. These two supermarkets attract 39.1 per cent and 37.8 per cent of shoppers respectively.
Iceland follows close behind, with 34.2 per cent of shoppers, and Safeway holds fifth place with 28.6 per cent. Only 32.9 per cent of shoppers visit independent or corner shops weekly. Corner shops continue to suffer at the hands of the big superstores, and during the Nineties their numbers diminished by 22 per cent, giving the overall impression they are hanging on by their fingertips.
Price is an issue with most shoppers, according to the report. More than 18 per cent of Tesco customers shop at the supermarket because of its perceived low prices. Five of the other leading supermarkets have a higher proportion of price-motivated customers – most notably Kwik Save at 35.4 per cent and Asda at 31 per cent. Interestingly, Tesco has recently reinforced its commitment to a price-led strategy, after announcing earlier this year, along with Asda and Somerfield, an intention to bring multi-million pound savings to customers by slashing prices.
When it comes to quality though, the research paints a different picture. Beleaguered Marks & Spencer leads the way. A massive 40.5 per cent of its customers nominate good-quality food as a number one priority. In second and third place are Waitrose (34.5 per cent) and Sainsbury’s (23.6 per cent).
Over the past year, Sainsbury’s has invested heavily in repositioning itself as a premium food retailer, focusing on quality and range rather than cost, using a TV campaign featuring celebrity chef Jamie Oliver.
In the UK the average consumer’s weekly spend on groceries is &£46, but stores tend to draw their customers from distinct portions of the expenditure spectrum. At the bottom end of the scale, Kwik Save has the largest percentage of customers spending less than &£35 a week. Over 48 per cent of its shoppers fall into this bracket, compared with Somerfield, where 43 per cent spend less than &£35 a week and Iceland, with 40.7 per cent.
Morrisons has a high proportion of customers in the mid-range weekly expenditure of &£35 to &£59, with 37.5 per cent of its customers spending that amount each week. Also prominent in this demographic are Asda (36.6 per cent), Iceland (35.5 per cent), Safeway (35.0 per cent) and Tesco (34.8 per cent).
The research reveals that the upper end of the market, where consumers spend in excess of &£60 a week, is clearly dominated by Waitrose, Sainsbury’s and Marks & Spencer. Waitrose and Marks & Spencer continue to lead in the top spending bracket of &£105 or more each week.
Supermarket chains invest heavily in site location planning, since most customers are only prepared to drive their cars for a limited period in order to reach their preferred store. The report data confirms this assumption and reveals that most shoppers (34.8 per cent) travel one to two miles to their main store. A good proportion of shoppers – 29.6 per cent – travel less than one mile, while 18.9 per cent take a three to four mile journey. Few people travel further: just 9.2 per cent travel five to seven miles. Not surprisingly only 7.4 per cent of people are prepared to travel more than eight miles to their supermarket, although in many rural areas choices are severely limited.
There is no doubt that the UK grocery trade will continue to change at a rapid pace. Consolidation into fewer and larger chains gives superstores better access to capital and other resources. The emergence of global superstore chains is just around the corner. Wal-Mart, Royal Ahold, Metro and Carrefour are set to offer worldwide consumers greater variety and quality, underpinned by the promise of better pricing based on economies of scale. The next few years could see a complete change in the way food is retailed, with the UK league table for supermarkets looking very different by 2010.