London, United Kingdom (PRWEB) September 21, 2012
The Supermarkets industry’s performance is reliant on consumers' incomes and their willingness to spend. The industry has reached a level of ubiquity that very nearly sets it aside from ordinary economic fluctuations. With expected revenue of £134 billion in 2012-13, supermarkets represent a sufficiently large enough share of national retail spending to be nearly immune to the effects of a recession. Most products sold by supermarkets are considered non-discretionary: the kind of spending that consumers are unlikely to abandon unless faced with severe poverty. According to IBISWorld industry analuyst Suzannah Rowley, “combined with the ability of large supermarkets to buy cheaply and sell at low margins, this means that supermarkets can actually benefit from poor economic conditions like those occurring over the past five years”.
The industry drew revenue away from convenience stores, department stores and specialised food retailers as consumers sought to minimise their household spending. Despite six quarters of economic contraction, the Supermarkets industry managed to continue growing over the past five years. Although this growth was low compared with historical results, the industry's stability was demonstrated in its 0.6% increase in 2009-10 and its forecast 1.3% annualised growth for the five years through 2012-13. While struggling consumers naturally gravitate to lower prices offered at supermarkets, they also spend less, explaining the lacklustre performance of the past five years when compared with historical performances. Industry revenue is estimated to grow by 2.5% in 2012-13.
The industry has already moved to capitalise on the shift of consumers to cheaper goods. Rowley adds, “the introduction of private label products - hastened by the performance of Aldi supermarkets - has allowed supermarkets to retain higher margins on goods sold at lower prices”. This will be further pushed by the move of US warehouse group Costco into the UK market. As the economy is expected to undergo a slow recovery from the recession, supermarket growth will also be gradual. Most industry activity will be focused on limiting costs by consolidating, installing self-serve checkouts and attempting to take more control over supply chains. This will ensure that profit improves over the next five years, backed by stronger growth in revenue to 2017-18.
The Supermarkets industry has a high level of market share concentration with a significant group of major supermarkets dominating the industry. Tesco, Sainsbury's, Asda and Morrisons account for over 80% of the market. The top four players gained market share over the past five years to the detriment of smaller supermarkets. As the industry faces ongoing consolidation, and there is significant attention paid to the dominance of some of its largest members, a cluster of mid-size supermarkets has been struggling to keep pace with the largest players. While the vast majority of the 57 supermarket chains operating in the United Kingdom are small, regionally based entities, 15 larger firms retain a share about 95% of industry revenue.
For more information on the Supermarkets industry, including latest industry trends, statistics, analysis and market share information, purchase the full report from IBISWorld, the nation’s largest publisher of industry research.
IBISWorld industry Report Key Topics
Supermarkets retail a range of groceries and food lines including fruit and vegetables, bread, cigarettes, canned goods, toiletries, dairy goods and cleaning products. Excluded from this industry are liquor retailers, specialised food and fresh food retailers, takeaway food retailers and convenience stores.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalisation & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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