UK’s Retail Market

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UK’s Retail Market
Li reports that a survey conducted by IGD revealed that the UK retail market, from 1998
to the year 2008, has been on an upward growth trajectory, with a market value of grocery
growing from £93.3billion in 1998 to a whooping £146.3billion in 2008 (1). Nevertheless, the
retail market in the United Kingdom of late has experienced a myriad of challenges. Due to the
global financial crisis that hit the world since 2008, the retail market in the United Kingdom, just
like other sectors of the economy, has been reeling from reduced consumer spending, high
operating costs and financial crunch. Notwithstanding, the UK retail market still recorded
impressive growth rate during the economic recession period. Li observes that in 2008, the year
in which the financial crisis raised its head, the grocery market value rose by 4.8% to touch a
high of £146.3billion (1). In the United Kingdom, the retail market dominates the grocery market
as it accounts for almost three-quarters of the total grocery sales. The retail market is dominated
by Tesco, ASDA, which was an acquisition of Walmart, Sainsbury and Morrison. The four
supermarkets comprise a list of the four largest retail chains in the United Kingdom in that order,
with Tesco dominating the lion market share. The giant retail chain of stores controls 31.4%
market share, ASDA Walmart comes in second dominating 16.7% of the total retail market, the
third dominant player is Sainsbury, dominating 16.2% market share and the fourth player is
Morrisons whose market share stand at 11.1% of the total retail market (Henry, 78). According
to the survey, which was done by TNS Worldpanel between May 2006 and May 2007, Henry
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reports that other retail players include Somerfield that controls 4.0% of the market share,
Waitrose controls that 3.9%, Iceland that controls 1.6% and others who include traditional stores,
convenience stores and online channels that control 15.1% of the retail market (78). Though
Tesco dominates the retail market in the United Kingdom, fierce competition is posing threats to
its long-term pole position as other players continue to eat into its market share. Tesco, therefore,
needs to continue enhancing its brand through product innovation and services to maintain its
dominance in the retail market. Henry opines that though Sainsbury seems to be at a distance in
retail market dominance , the retail chain is enhancing its competitiveness under the leadership
of Justin King, the chief executive officer of Sainsbury, a factor that may pose future threat to
Tesco’s dominance in the retail market sector (78). The huge market share that Tesco enjoys,
which is a combined market share of ASDA Walmart market share and Sainsbury market share,
indicates that the retail giant enjoys the relative competitive advantage than its peers in the
industry. Therefore, due to the huge discrepancy in the percentage retail market share that Tesco
controls compared to its competitors, such as ASDA and Walmart, there arise a need to analyze
the financial and strategic resources that give Tesco, the second largest global retailer based on
profit, a competitive advantage over the other supermarkets in the United Kingdom This paper
seeks to analyze and compare Tesco’s performance to other retail chains in the United Kingdom,
notably Sainsbury.
Overview of Tesco Supermarket
According to Clark Tesco was established in the year 1919 by Jack Cohen. The founder
of Tesco started Tesco as an accident after realizing a profit of £1 from sales of £4. At the time
Tesco founder was selling surplus groceries from a store in East End London. In 1924, the Tesco
brand was born from the initial letters of Mr. T. E Stockwell, from whom Jack Cohen had bought 
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a shipment of tea, the letters were combined to form Tesco. Clark reports that the pioneer Tesco
store opened its door in 1929 in Burnt Oak, North London. Since 1929, Tesco has been riding on
a growth tide. In 1930s, Jack Cohen opened a warehouse and headquarters for his fledgling
company, Tesco. The retail giant then became a private limited company in 1932 and in 1947,
Tesco Holding was floated on the London stock exchange at an initial public offering price of 25
pence (Palmer, 34).
Clark observes that the retail giant started expansion plans during the period of 1950s.
Tesco’s expansion and growth plan was both organic and through acquisitions. The United
Kingdom retail giant pursued the strategy of acquiring its rivals. For instance, within a decade
that is between 1950 and 1960, Tesco acquired 70 William stores, 200 Harrow stores, 97 Charles
Philips stores, and the Victor Value chain (Palmer, 34). It is also during the same decade that
Tesco opened its first self-service store in St Albans and supermarket in Maldon (Palmer, 34). In
1968, the retail giant opened its first superstore in Crawley, West Sussex. In 1