• Submitted By: lira91
  • Date Submitted: 01/22/2014 3:03 AM
  • Category: Business
  • Words: 1624
  • Page: 7
  • Views: 108

Industry Background

1. The origin of the UK supermarket industry dates back to the 1850s. Some 40 years on multiple food stores subsequently accounted for around 50.0 per cent of all multiple stores. Their growth can partially be explained through the increased sophistication in marketing themselves and their products through visually impressive displays, also the development of national brands and direct advertising to consumers.

2. The launch of big chain stores within the UK followed quickly on the heels of earlier US progress. In the first instance it resulted from mergers between grocery firms and Home and Colonial Stores in the 1920s leading to over 3,000 branches. Following what proved to be a temporary slow down in rapid growth during the second World War the supermarket industry remerged with the new addition of self-service and the discovery of economies of scale.

3. By 2000 the number of supermarkets had grown exponentially from the low hundreds in the 1950s to 4,500 to 7,144 by 1998/99. The shape of the industry had also been transformed via the gradual shift from a market defined by local dominance [by a few] to national dominance [by a few]. In 1998/99 the market share of the top four supermarkets was 71.3 per cent and 79.8 per cent for the top five supermarkets. Using another measure of market concentration, the herfindahl-hirschman index (HHI), the value was 1,506, whilst the weighted HHI was 1,804 .

4. The rise in market share of Tesco plc to 24.6 per cent in 1998/99 was particularly significant. The swift ascendance of Tesco was aided by the successful launch of loyalty cards which enabled a successful marketing campaign customised to customers’ tastes and preference. Other supermarkets followed this initiative and loyalty cards are now a common feature. Increasingly the product range is driven by consumer choice which is further differentiated by income, such that products are aimed at low income, middle income and the high end...