Comparative analysis of food retailers growth strategies in the UK - Research Paper Example

Traill (1998) asserts that the food retail sector is characterized by competitive and innovative retailers who have remain resilient despite economic downturns. There are high stable street independent retailers, but most of them struggle to survive due to the rapidly changing business environment and changes in consumer behaviour (Henry, 2011). There is evidence of high concentration of economic power by the industries in the food retail chain between the primary producers and consumers (Henry, 2011).

The supermarket model in the UK is characterized by self-service shopping with various departments that handle the production and distribution of the food grocery items. The sector has made savings through elimination of the traditional wholesaler, and ensuring direct supply from the manufacturing industries to regional distribution centers, and finally to the superstores that are conveniently located near the customers (Department of Trade and Industry, 2004). The lower unit costs and high net margins associated with supermarkets have increased their market share and contributed to ‘spiral growth’.

Some of the features that are evident in the spiral growth of the leading supermarket retailers such as Tesco and Wal-Mart include the high costs of market entry due to the lower prices. For instance, Wal-Mart’s ‘Every Day Low pricing model’ ensures savings made in the supply chain activities are passed on to consumers through price reductions thus contributing to high sales volumes and significant market growth. Accordingly, the spiral growth is characterized by own labeling that return the highest contribution margins to the retailers.

The retailers’ brands are capable of competing effectively with the manufacturer’s brands through packaging and shelf placement. The own labels do not only enhance the revenues, but also improve the retailer brand