Case Study- The Future of the UK's Grocery Sector

Case Study: The Future of the UK’s Grocery Sector

Caught up in the midst of the pandemic, the UK grocery industry has faced dramatic changes especially in the way retailers operate and sell.

Recently, the Ipsos Retail Think Tank (RTT) held a discussion on sharing ideas about ‘what the future holds for the UK grocery sector.’

Most members agreed that a number of influences are causing fundamental changes. What are they, and how are they affecting the UK grocery industry and shaping its future?

  1. Rise in discounters

The number of discounters won’t stop rising. This has led the “big four” (Tesco, Sainsbury’s, Asda and Morrisons) to adapt to their offers and change how they operate as retailers.

Driven by economic and political uncertainties, customers will still look for better value. Supermarkets had underestimated these discounters when they first appeared and now have to deal with the consequences. The discounters have filled in customer gaps before supermarkets did and now the big four are challenged to catch up with themselves.

  1. Shift in buying habits

This generation has demonstrated a shift in spending patterns, and most folks’ money and time go to goods and services other than groceries. Solution-focused companies such as Amazon and Uber have confirmed this with statistics.

Knowing that “millennials” and “gen X-ers” have spending habits that differ from their parents’, RTT members said, “it is unpredictable to confirm if this generation can spend 2 hours per Sunday in the grocery section.”

With shopping online as the new normal, brand loyalty to concrete supermarkets is becoming dwindling. Grocers may need to re-invent their grocery schemes to suit customers’ needs at this time, such as deliveries for bulky orders to stay ahead and exceed customer expectations.

Director of retail intelligence, Dr. Tim Denison said, “supermarkets need to provide immersive experiences and a compelling reason for people to choose to spend time in them.”

  1. Digital Revolution

Unlike the industrial revolution, the digital revolution reinvents itself when new technology is introduced. Retailers have to continuously adapt to ensure customer demands are conveniently met.

If Amazon can make the most out of every new technology, why can’t other supermarkets do it? 

  1. Merging Companies

Due to an increase in competition within the grocery sector, rising costs and decreased margins, companies are taking a defensive move and merging with others to shield themselves against the rising competition. 

Although more buying power results in price cuts, these could lead to the closure of businesses due to redundancies in the market.

With the pressure of discounters, supermarkets think selling at low prices while providing value can drive demand and this can be achieved through increased buying power.

Martin Hayward, a data lawyer stated that “The ultimate state of efficiency is commoditisation – everyone gets the same products, from similar, faceless, efficient outlets at a bargain-basement price” 

As prices hit rock bottom, opportunities may emerge for small retailers as they get the chance to sell their unique products and in a unique way too because this is what the new generation is amused by.

Despite change being disruptive, members of the RTT maintained that they are optimistic about the future of the UK grocery industry. Retail analyst Nick Bubb shared that “the Food Retail sector has been one of the best performing industries in the UK market so far,” and this is what leaves the City optimistic in its outlook.

About Sam P

EnterpriseZone Staff Writer

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