Type: Research Essays
Sample donated: Jared Munoz
Last updated: April 17, 2019
1. Terms of ReferenceMichelle Armit, a BA Business Studies student has been asked to compile a report for Retail Environment. The aim of the report is to research a retailing format of her choice and identify future trends in retailing. This report will concentrate on grocery multiples in supermarkets.
Multiples are store chains, which have a number of shops that run on similar, head-office dominated lines. Traditionally defined as enterprises with over ten shops. Their size provides the opportunity for tough negotiation over the unit prices of the stocks being purchased.2. ProcedureThe information in this report was obtained from various web sites, books and notes handed out from the lecturer.
The web site; www.bbc.co.uk was the most useful site containing a great amount of information on multiples and also provided other relevant sites.
3. Findings3.1 Historical Developments of MultiplesThe effects of the retail revolution are more apparent in the grocery trade than anywhere else in retailing. The grocery trade comprised about 141 000 shops in 1950 with average annual sales of around ï¿½9000. This began to rapidly decrease and the number of grocery stores virtually halved in 15 years. The multiples began to rise after the Second World War, expanding in the 1960s and 1970s.
By the 1980s this expansion began to ease. Specialist multiples initially majored in food and footwear e.g. Marks & Spencer. Major organisational changes have taken place within the total grocery market and with the rapid expansion of multiples; the independent and co-operative societies have suffered a relative decline. Three groups, Sainsbury, Tesco and Asda, have together increased their market share from 21.6 to 39.
7 per cent over the period 1978 to 1984. By the 1920s, food multiples formed over half of all retailers and due to more flexible legislation, multiples have a larger share of the UK market.3.1.
1 SainsburyJames John Sainsbury in London established the first Sainsbury store in 1869. It became popular and gained a good reputation due to its quality fresh foods sold at low prices. The store set high standards in hygiene and expanded as good site locations became available. It was a family business and initially only sold dairy products. In the 1980s it became a market leader and now between Sainsbury and Tesco they have 50 per cent of the London regional market for packaged grocery products.
3.1.2 TescoJack Cohen formed the store Tesco in 1932 and it was a one-man management system. It was originally only 500 square feet and in the 1950s there were 150 small stores.
Low prices moved business fast and assisted in the growth of stores in the Uk. The first supermarket was originated in 1956 and since then has rapidly increased in many undistinguished trade locations. The above table shows that although the number of store outlets almost halved in the ten years, the average sales area had more than doubled. The outlets were greater in size so therefore providing more stock to the consumer making the business more successful. The reason for the grocery retailers closing down stores and opening larger units in out-of-town locations was due to the demand pattern of the consumer; convenience, fresh foods, merchandise range, car parking, store layout and value for money.1.Handbook of Retailing, p.
34-352.Lecturer’s notes, Lorraine Quinn4. SWOT analysis4.1 StrengthsDue to the fact that multiples are chains with over 10 stores, they are able to buy in bulk and sell at low prices. Many stores which are multiples are well recognised due to great advertising and selling techniques, they can offer their own brands and again sell these at low prices. An example of a store that sells own brand products is Safeway. They offer a wide range of items at extremely low prices all of which contain the Safeway name and logo.
The strength of buying power achieved by the multiples is significant. By the time the multiple has claimed or negotiated all discounts, allowance contributions and rebates, the net buying price can be at least 10 per cent less than the best terms available to the independent.4.2 WeaknessesMany multiples have extended their opening hours to suit working housewives etc although this is an advantage to the public; the number of workers has declined due to this, as the unsociable working hours do not suit most of these people. As the number of employers decrease the quality of customer service will also decrease causing major problems in these stores.
An example of a store, which has changed its opening hours, is Asda. Problems can arise due to cash payment methods for example, since it takes from seven days to two weeks for a check to clear, merchants must wait to collect the funds. In cases of check return and check fraud, it is conceivable that merchants could end up writing off 50 percent or more of the value of the check just in processing fees.
4.3 OpportunitiesNowadays more and more multiples are expanding their stores while not opening up more. This is due to the demands of people in society today. They want higher quality stores with greater facilities available. To do this many multiples had to close down smaller stores and open large stores in out-of-town locations.
This allowed them to expand to suit the customer’s needs. Opportunities available to these multiples is; the more space they have at selected locations, the more room they have to expand allowing them to carry on satisfying customers demands.4.4 ThreatsAs many multiples have a wide range of large stores, this could lead to bankruptcy if they are not making enough money to keep the stores running. A great deal of these multiples offer high quality goods at low prices, this could be the worst thing they could do because if they do not make sufficient funds from their more expensive products, they could face major problems paying for the up-keep of their stores. A prime example of this was Asda, in the 1980s it nearly went bankrupt and had to obtain help from the Government.1.
Retail Marketing, Peter J. McGoldrick2.Lecturer’s notes, Lorraine Quinn3.
Handbook of Retailing, P.38-394.Website; www.bbc.
co.uk5. PESTEL factors5.1 PoliticalEmployers need to remember the ‘Working Time Regulation, 1998’ when setting up employees hours. Due to these regulations employees can work a weekly average of 48 hours an average daily day of 8 hours. This could cause problems if employers do not work by these rules and could result in them being sued. Employers need to be aware of the ‘Resale Prices Act 1964’ it is the abolished law for minimum prices.
On pricing, it concluded that there were two practices, which were operating against the public interest when carried out by the largest multiples* Selling some frequently purchased products below cost which contributed to a situation where the majority of products were not fully exposed to competitive pressure (Asda, Morrisons, Safeway, Sainsbury and Tesco); and* Varying prices in different geographical areas in the light of local competition so that again the majority of products were not fully exposed to competitive pressure and competition in the supply of groceries was distorted (Safeway, Sainsbury and Tesco).Not all the supermarkets within the range of inquiry conducted these practices. A number of possible remedies to these pricing practices were considered, including a ban on below cost selling and requiring the supermarkets to put their prices on the Internet.5.
2 EconomicRetail sales are now used as an important economic indicator; they reflect whether consumers feel confident about their future incomes. Surveys are done to find out where people are spending their money, retailers take note and launch sales, mark down prices. Factors, which could affect sales, are inflation.
It determines wage rises and is a measure of the rise in prices between one year and the next. Inflation is determined by levels of consumption, and is also determined by the strength of the pound (ï¿½) against other currencies. Unemployment shows a downturn in the economy and puts retailers at risk in areas where there is one single employer.1. Website, www.stores.org2. Website, www.
clearlybusiness.com3. Lecturers notes, Lorraine Quinn5.3 SocialIncreased retail change nowadays is because there are more pressures on children for first class education. Also, more women are in higher paid employment or are entering education so therefore do not have families.
This results in a top-heavy population, more old age pensioners and fewer children. Nowadays more and more people are willing to use credit cards so they are more likely to be in debt. One of the busiest trading days is a Sunday and churches struggle to attract people on Sundays.
Social factors are now affecting religion. Crime has increased so there has been an increase in security on retailers for example; staff theft, robbery and till snatches. More and more people are buying cars so there is an increase in out-of-town shopping.5.4 TechnologicalIn recent years there has been an increase in mobile phone and computer shops but it is not only consumers who are making use of technology, retailers are now using CCTV, EFTPOS (Electronic Funds Transfer at Point of Sale System – use of Credit Cards/Switch), EDI (Electronic Data Interchange), and bar coding. These have benefited retailers in a huge way as they gain greater information and therefore can increase their productivity.
As technology moves on and better items are produced, sales will increase. Examples of new technology produced over the years are; microwaves, washing machines, dish washers, digital television, WWW and broadband.5.5 EnvironmentalEnvironmental issues, which could affect multiples, could be planning permission; will the store have roads leading from the front and back? Will houses or trees have to be removed in order to build new stores? There are great amounts of planning issues, which need to be considered before a new store can be opened.
Weather conditions could affect the opening of stores, therefore income will decrease5.6 LegalStoreowners need to be aware of existing laws for example, ‘Resale Prices Act 1964’ this is the abolished law for minimum prices. There are two main branches of law; ‘Criminal Law’, shoplifters would be charged under this and ‘Civil Law’, involves individuals rights and wrongs. Laws differ across Scotland, England and Wales, Northern Ireland and Europe. Sunday trading is still an arguable issue due to the rapid decrease in people going to church due to retailers opening on Sundays.1. Website, www.
store.org2. Website, www.bbc.co.uk3. Website, www.
clearlybusiness.com4. Lecturers Notes, Lorraine Quinn6. RecommendationsThe twelve largest multiples in the UK represent 55 per cent of UK grocery sales. The UK multiples account for 80 per cent of the retail food market there and are currently involved in a market share war. The major UK competitors are Sainsbury, Tesco, Gateway, the Argyll Group and ASDA. Although they are involved in a share war, the ten largest retailers in the UK already have a 40 per cent share of the market.
This is estimated to increase to 50 per cent by the year 2010.Multiple stores may be in competition with their suppliers so far as promoting their ‘own-label’ product ranges are concerned. The fight for shelf space and position is set to increase.