Tesco has increased its market share by the smallest margin since 2002 as rival chains from across the sector stepped up their efforts to win customers. New research from retail analysts Verdict Research shows the supermarket giant is still the market leader, but it grew its share by just 0.8% last year.
It is the first time in five years that Tesco’s gain is smaller than the combined market share gain for Asda, Sainsbury’s and Morrisons (previously Safeway). Tesco now has a share of 27.6% compared to Asda’s 14.1%, Sainsbury’s has a 13.8% share and Morrisons has a 9.9% share of the market.
Verdict says that the slowdown in Tesco’s gain should “not necessarily” be interpreted as the chain’s growth faltering but as increased competition from smaller chains, such as Waitrose, and the discount stores, including Aldi and Lidl, taking its toll.
The report also warns that “the outlook is bleak” for smaller and independent chains. Nick Gladding, retail analyst at Verdict, says: “The grocery sector is rapidly consolidating and those without operational scale and a sustainable point of differentiation will struggle.”
The “Big Four” – Tesco, Asda, Sainbury’s and Morrisons – account for 65.4% of the £118.2bn market, up from 63.6% in 2006. This growth is down to deepening existing ranges, low prices and diversification of products away from purely grocery offerings, such as clothing.
The second-tier grocers have all increased their shares to around 3-4%. Somerfield and Co-op are concentrating on developing their local convenience store presence, while Marks & Spencer and Waitrose have relied on quality, value and ethical trading to gain customers.
Aldi and Lidl saw growth of 1.5% and 1.3%. This is due to enhanced shopping environments boosting customer perceptions. Despite their gain in market share, they still remain peripheral to the larger supermarkets.