Retail Business Analysis of Sainsbury
The report is prepared to get an overview of the current trends of the retail industry and know about a company from the industry to perform in-depth analysis and make a decision about their current condition on their performance (Bagozzi et al., 1998). Based on all kinds of information on how the organization is performing and what should be their strategy for improvement will be discussed. For the primary analysis, it has been selected 20 members from friends and family who are familiar with the company and for better information collection. It has been selected Sainsbury Supermarket for the detailed theoretical and analytical analysis based on the different business models. Here, this study will recommend the organizational focus and strategies to perform better in the long run.
Trends in Retail Business Industry
The retail industry is vital to the UK economy which has generated £395billion worth of retail sales in 2017 and £319,000 retail businesses in 2018. The UK industry of the retail supermarket industry is very enriched and vast with many of the successful retailer’s shops. According to the research of UK, the retail supermarket industry is one of the most booming and competitive sectors of the country to flourish overtime (Bagozzi et al., 1998). There are basically four market-dominant retail supermarkets in the region and they are Tesco, Asda, Sainsbury’s, and Morrison’s. According to the news reports, all these retail shops have over 60% of the total market share combined and over the past 5-10 years, a slow but consistent strategic shift has taken place in UK. The industry has seen an influx in discounted supermarkets like Lidl and Aldi retail shops. Overall there was a direct impact on the consumer buying pattern over the years considering the market development and share.
The industry will go through some significant factors and among the most significant factor is the pace of changes in consumer behavior. Some other prime factors which can affect the industry are-Wages, Brexit, Consumer spending, Online shopping, Competition of skilled retailers.
Last 5 years trends of Retail Industry in UK
Fig: Last 5 years trends of Retail Industry in UK (Source: statista.com)
The above trend shows that the sales volume of this market is increasing from 2015 to 219, meanwhile, the income of this industry is also increasing from 2015 to 2019.
Similarly, the GDP from this industry is somehow increasing or somehow decreasing but the market value of this industry is also increasing from 2015 to 2019.
The reason behind the increase in sales volume, income generation, and market values just because of extending the national and global business of these retails products of UK. As a result, the number of the customer is increased, sales increased, as well as income increased and that tends t increase market value.
Fig: Last 5 years scenario Retail Industry in UK (Source: statista.com)
The above column chart shows that sales volume is increased from 2015 to 219 because the market is extended globally and it has increased so many customers of those rentals products.
When the sale is increased, the income of the industry will also be increased and the result is showing from the above column chart from 2015 to 2019. Though the expenditure is a factor it is a good sign that the industry is having a good amount of income generation over the years. Similarly, the GDP from this industry is somehow increasing or somehow decreasing and it is because of a global economy with the economic aspect of UK like Inflation, when the economy faces large inflation then the GDP from this industry is declining and that happens in the year of 2017 just because of inflation rate increased. Finally, when the industry is giving a good number of sales volume and good income generation, then ultimately it will be said that the market value of this industry will be increasing and that is actually happening from 2015 to 219.
Organizational Overview: Sainsbury’s
Sainsbury’s is a public limited company and one of the leading UK food retailers. The retail food chain is the main business of the company. It has more than 145,000 employees therefore, it is one of the major players of the economy of UK. The retailer giant is known for its quality and service along with a price.
At present Sainsbury’s retail food chain has 800 stores including supermarkets and convenience stores. It used to be the largest grocery chain in UK before Tesco and Asda. The retail store has 16% of the market share and revenue of GBP 23billion. But in the past decade, it has had a decline in its overall sales with the lowest revenue generation in 2011(Walters, 1975). So the organization needs to work on its business models seriously and improve their current marketing strategy for the better results in the future. Recently they tried some new strategies for improving the overall market share and market position of the retail giant. Here I will discuss them all to have a better understanding.
Swot analysis of Sainsbury’s
As a primary business model to get an overview of the business condition of an organization it is important to conduct a Swot analysis of the company. Here the analysis of Sainsbury’s given below:
- Right expansion moves: The retail store chooses the right strategy at the right time to expand its market. They make a proper and well-decided move on the market of UK to expand their business from a local shop to a global retail supermarket (Castillo, 2018).
- Business Philosophy: The business philosophy of the company helps customers live well by promoting their sustainable low-cost strategy in their product categories. They were successful to attract and retain customers from all income segments and made them brand loyal for a long period of time.
- Opportunity to cater to a variety of customers: The retail store offered all types of customers from different economy segments through various numbers of branded and expensive products.
- Innovative promotion strategies: Most of the promotional strategies are very innovative and pitch the brand perfectly against their competitors. So it became easier to attract more customers and hold on to them compared to the other brands of UK (Castillo, 2018).
- Coupons: Sainsbury’s coupons are designed by researching account data on the shopping behavior of the customers collected and compiled from the Loyalty Card Scheme which was very helpful for the retail shop.
- Brand Switching: Unlike other retail brands Sainsbury’s faces some issues of brand switching. In spite of loyalty programs and promotions, it is getting harder to retain customers for the rapid digitalization process
- Low margins: With growing competition retail space and online business is decreasing the volumes. So the retail shop is trying to cut down costs along with keeping the prices lower than the competitors.
- Growing costs: With the new rules and regulations applied from 2016, procurement costs, technology support, multilevel parking, educated, and well-informed salespeople are increasing the expense of the shop frequently (Cauwe, 1979).
- Limited success outside core business: The retail super shop has very limited success apart from its core business segment which is a big drawback in the competitive business era.
- Need investment for new technologies: with the expansion of technology Sainsbury need to integrate their process and investment more on technology to fulfill the vision of the company in the future (Cauwe, 1979).
- Growth in villages: The retails shop has the opportunity to target the rural areas and focus on them as they are also very concerned about everything for the blessings of digitalization.
- Opening up new markets: The adoption of new technology can open up the opportunity to enter a new emerging market for Sainsbury(Rigby, 1969).
- New trends in consumer behavior: They can build new revenue streams and diversify their product categories to meet up the need and follow the new trends of consumer behavior.
- New customers from online channels: Over the past few years the company has invested into the online platform. This investment has opened a new sales channel and it can also leverage the opportunity of knowing the customer better and serving their needs online.
- New rules and regulations: New environment regulations could be a threat to certain existing product categories of Sainsbury’s.
- Increased Prices of raw materials: The rising price of the raw material can pose a threat to the Sainsbury’s profitability.
- New technologies developed by the competitor can damage their progress for the long term in the future.
- Shortage of skilled workforce: It can represent a threat to the steady growth of profits and Growing strengths of local distributors can be a threat in some markets for a higher pay scale (Rigby, 1969).
Poter’s five forces analysis on Sainsbury
- Competitive rivalry: The retail market is extremely competitive and many more companies are trying to get into this sector for competing. Sainsbury has a market share of 16%, which indicates a positive trend through the retail giant is lagging behind Tesco, Asda, etc.
The big supermarket chains have a different competitive advantage over their competitors. So they are different from each other in competing and attracting their customers.
- Barriers for entry: Barriers to entry are extremely high as it is the most sophisticated sectors and needs a lot of investment. The companies also need to do significant brand development, so there is very little scope for new entrants to enter and establish their market (Kotler and Armstrong, 2018). Apart from that Local knowledge is extremely important and difficult for foreign firms to copy and use in their organization.
- Threats of Substitutes: The threat of substitutes is low because it is a consumer’s necessity mostly in the developed world and emerging markets. The shops are trying to make the shopping experience extremely pleasurable which makes them hard to substitute. The only major threat of substitute is found in internal industry threat for one to other supermarkets.
- Buyer power: Buyer power is high as many competitors are available in the market. It depends on differences in price and consumer loyalty and green credentials. Here the switching costs are low for consumers. So their power is increasing day by day.
- Supplier power: Supplier power is very high in the retail market. If the products of big companies do not reach supermarkets, their sales volumes and profitability can get damaged. So it is important to consider the big suppliers very seriously to get better outcomes from the market as well as the competitive business (Kotler and Armstrong, 2018).
Recommendation for the Improvement of Sainsbury
The recommendation regarding the improvement of Sainsbury as given as follows:
- Sainsbury’s need to use their current geographical positions to enhance market sustainability and focus on geographical specific deals based on loyal buyers base. This would allow them to develop a better business position in the market.
- The retail super shop needs to develop targeted tires connected with its products category. The main focus should be on the development of a strong loyal customer base that is not only quality conscious but also value-conscious.
- The firm needs to develop a new product line and use a cost-conscious approach with higher quality. This would enable them to compete directly with the discount market segment and grab their customers easily (Crane et al., 2017).
- They need to increase their investment in digitalization and try to grab the maximum level of customers online to make maximum profit.
- Sainsbury can go for a dual branding strategy to improve its market share and also merge with small retail brands to give the giant retailers a great competition. Or they can merge with Asda to improve their market share and become a part of the second giant retailer of UK market.
- Increase variety and uniqueness in the shopping experience to get a better response from the customers and increase their customer base. The promotional strategies need to design for both online and offline marketing.
- The retail shop also can promote different facilities, discount cards, discount codes, bonuses, cashback, etc. to attract the customers and provide more facilities and flexibility to the consumers for their better convenience (Crane et al., 2017). They need to develop a direct link with the target audience which will allow them to engage and enhance customer’s experience in the market.
The discussion focuses on the importance of developing a market-centric strategy for Sainsbury. It is clear that the UK supermarket industry is very competitive and currently dominated by the 4 giant retail super shops (Crane et al., 2017). Here the analysis focused on Sainsbury’s new marketing direction strategy and their development approaches which are needed to do immediately.
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