Big Four share the shoppers
Oct 31 2007 by Iain Laing, The Journal
IT IS virtually impossible for one supermarket to form a monopoly, a retail research body has said, as the Competition Commission prepares to release its preliminary findings into the grocery market.
Verdict Consulting, which has a close relationship with major retailers, polled 6,000 UK consumers in an independent study.
It predicted that competition is set to increase rather than weaken in the next five years as retailers battle to secure customer spending.
The Competition Commission has been looking into the relationship between suppliers and retailers, local competition and planning issues for the past 18 months.
In particular, it has been focusing on the issue of land banking – buying land to prevent competitors from opening a store on it.
The Commission is expected to accuse supermarket giants of strategically holding on to land in a bid to stifle competition.
It is anticipated that the watchdog will call for changes to planning regulations to make it easier for new stores to open in areas where competitors already have a foothold, and also recommend the appointment of an independent ombudsman to protect small suppliers.
Verdict’s analysis found that in terms of grocery shoppers, no one chain had an exclusive hold over customers.
The big four supermarket players - Tesco, Sainsbury, Asda and Morrisons – shared well over eight out of 10 of their regular customers with other food stores, it said. And none managed to persuade anywhere near a majority of its shoppers to buy from it alone.
Verdict said that despite the growth of the main grocery players over the past five years, customer-sharing numbers remain virtually unchanged and customer choice has not been diluted.
It said that despite being the leading UK grocery retailer, Tesco shared around as many of its regular shoppers as other players in the market.
Verdict’s director of consulting Neil Saunders said there was a common belief that because food retail had a number of dominant players, consumer choice was stifled.
But the reality was that grocery retailers faced the battle of how to hold on to increasingly fickle customers, Mr Saunders said.
He said: “Verdict’s data shows that six out of 10 food shoppers make regular use of a food retailer other than the big four supermarkets.”
The poll found that the average food consumer makes regular use of three stores, whereas in the majority of retail sectors, the average number of stores regularly used was just two.
The research group forecast that the battle for consumers would only intensify.
It said the competitive dynamics of the market we’re changing, with increasingly mobile shoppers able to use stores while travelling. It also noted the expansion of internet shopping.
Mr Saunders concluded: “What we must avoid, at all costs, is big grocery retailers being victimised for their ability.
“The major grocers are not big because they have some mystical power over the market; they are big because they excel at what they do.
“And from our analysis, it is very clear that they will need to keep excelling if they are to maintain their leading positions.”
He emphasised that the study had “no axe to grind – this is what consumers have told us”.
The Competition Commission is also expected to suggest that the “needs” test, under which supermarkets have to demonstrate that a town requires a new store, be axed.
This could instead be replaced with a “fascia” or competition test under which local authorities would be encouraged to look favourably on retailers who do not have a presence in the local area.
