| MP52223 |
| MAPS : Supermarket Services: September 2003 |
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This report covers: supermarket services
companies covered include: Asda Group Ltd, The Big Food Group Plc, Budgens Ltd, Co-Operative Group (Cws) Ltd, Marks And Spencer Plc, Wm Morrison Supermarkets Plc, Safeway Plc, J Sainsbury Plc, Somerfield Plc, Tesco Plc, Waitrose Ltd
BRIEF DESCRIPTION
| This report covers the range of services offered by supermarkets, examining the apparent rise of the one-stop shop and consumer behaviour related to this trend. It identifies consumer dynamics and market conditions that affect the development of supermarket services, illuminating the successes and flaws of those on offer. Following an executive summary & introduction, the report provides a strategic overview of the sector, with data on household expenditure on services, market segmentation, competitive structure and advertising strategies. Sector-specific analyses cover financial services, pharmacies, catering, Internet access, home delivery and other services. The report presents both an international perspective on the sector, and an analysis of political, economic, social and technological factors impacting it (PEST analysis). It considers consumer dynamics affecting the market, presenting the results of original research into attitudes towards, and use of, supermarket services by type. It concludes by profiling leading supermarkets and considering future prospects for the sector. |
EXECUTIVE SUMMARY
| The major supermarket chains have been engaged in expanding their online services, which include home delivery and financial products. New store formats have been put in place to allow for more hospitable cafés and also pharmacies. As the supermarkets expand their services so the debate broadens surrounding the threat they pose to independent retailers. |
| Tesco continues to dominate supermarket retail, including online home shopping and financial services. Its expansion overseas has now stretched to Japan - a notoriously difficult market for Western supermarket operators to successfully gain entry to. Vying for second position are Sainsbury's and ASDA. Both hold market shares of 16% to 17%, but backed by Wal-Mart's resources and buying power, ASDA seems set to overtake Sainsbury's in the near term. Morrisons continues to place emphasis on its quality food message, while maintaining a valuable alliance with HSBC. The market is also maintaining a close eye on Safeway and Somerfield, both of which are takeover targets for the large chains. |
| The expansion of supermarket services and one-stop shop formats has resulted in a demand for more floorspace. As a result of the Competition Commission's report in 2000, it has become increasingly difficult for multiple retailers to expand their sites and gain permission for new out-of-town stores. Consequently, the major supermarket chains have been looking at takeovers of other chains as a valuable means of expansion. This coincides with the return of supermarkets to the neighbourhood and the expansion of their convenience-store brands, such as Tesco Express and Sainsbury's Local. |
| Expansion in the convenience sector and the broadening of in-store services have attracted the attention of the Department of Trade and Industry. This is in particular relation to in-store pharmacies. Although these are popular with consumers, the Government is worried about the threat to independent chemists and other local retailers. The supermarkets continue to be adamant that they respond purely to the consumer and not the other way round. |
| The research by BMRB Access, commissioned by Key Note specifically for this report, highlights some interesting consumer issues. Over two-thirds of those surveyed wished to see supermarkets expand their services. This is a marked increase since the 2001 edition of this Key Note report, which showed that only around a quarter of respondents sought a wider range of services. However, it seems that many of the services on offer appeal largely to the affluent AB social grade. This is particularly the case with online services, where it appears that less affluent households are not as frequently connected to the Internet. |
| Although use of the Internet by more mature adults — so-called 'silver surfers' — has grown substantially, the young continue to dominate services provided in this arena, a trend supported by the BMRB Access survey's findings that the young are generally more open to the introduction of further supermarket services. |
| Financial products sold over the Internet by supermarkets still require greater market penetration. However, consumers are generally trusting of supermarket brands, so that this trust merely needs extending to financial services. With analysts predicting dramatic reductions in the cost of supermarket financial products in comparison with high-street banks, this will no doubt happen and could well result in a knock-on effect. The supermarket's strength lies in consumer visibility and retail style marketing. |
| The Expenditure and Food Survey 2001/2002, published by National Statistics, provides useful information on the population's spending habits. The survey shows that UK households are spending an average of £380.30 per week on services. Of this figure, £52.30 is being spent on leisure services and £5.20 on personal services. Supermarkets recognise the importance of tapping into these markets and attracting consumers at the same time that they are doing their grocery shopping. |
| Figures for expenditure on meals out and takeaways continue to rise each year as people increasingly have less time and, arguably, more cash. Supermarkets continue their efforts to refurbish their in-store cafés, making them more accommodating and offering a more extensive menus, in order to take more of the £10.90 per week being spent on restaurants and cafés, according to the Expenditure and Food Survey. |
| Holiday and travel services dominate leisure expenditure so it would not be surprising to see supermarkets expand their online capabilities into this arena. At present, the extent of their participation is largely limited to schemes that exchange `air miles' for loyalty card points. |
| With nearly 80% of the UK population owning a mobile telephone, it is not surprising that both Tesco and Sainsbury's have entered this sector. British households spend an average of £9.30 per week on telecommunications, a sure-fire signal to supermarkets that this could well be a lucrative market to move into. Tesco plans to launch a fixed-line telephone service, which will undercut BT, and the company's highly developed IT systems should be well-equipped to make a success of it, as signs of their success with online grocery shopping would seem to bear out. |
TABLE OF CONTENTS
| Executive Summary |
| 1. Introduction |
| BACKGROUND |
| DEFINITION |
| OBJECTIVES |
| METHODOLOGY and ORIGINAL RESEARCH |
| RESEARCH DIFFICULTIES |
| 2. Strategic Overview |
| WHY SERVICES? |
| WHAT SERVICES ARE ON OFFER? |
| Household EXPENDITURE on Services |
| Table 1: Household Expenditure on Services (£ per week, % and £m), 2001/2002 |
| Figure 1: Household Expenditure on Services (£ per week), 2001/2002 |
| Leisure Services |
| Table 2: Household Expenditure on Leisure Services (£ per week, % and £m), 2001/2002 |
| Figure 2: Household Expenditure on Leisure Services (£ per week), 2001/2002 |
| Television Services |
| Table 3: Household Expenditure on Television Services (£ per week, % and £m), 2001/2002 |
| Figure 3: Household Expenditure on Television Services (£ per week), 2001/2002 |
| Household Services |
| Table 4: Household Expenditure on Household Services (£ per week, % and £m), 2001/2002 |
| Figure 4: Household Expenditure on Household Services (£ per week), 2001/2002 |
| Telephone Services |
| Table 5: Household Expenditure on Telephone Services (£ per week, % and £m), 2001/2002 |
| Figure 5: Household Expenditure on Telephone Services (£ per week), 2001/2002 |
| Meals Out and Takeaways |
| Table 6: Household Expenditure on Meals Out and Takeaways (£ per week, % and £m), 2001/2002 |
| Figure 6: Household Expenditure on Meals Out and Takeaways (£ per week), 2001/2002 |
| MARKET SEGMENTATION |
| Mainstream National Supermarkets |
| Discounters |
| Convenience, Variety, Specialist and Small Chains with Some Larger Stores |
| Co-operatives |
| Competitive Structure |
| Table 7: The Top Five UK Grocery Multiples by Market Share (%), June 2003 |
| MARKET LEADERS |
| By Turnover |
| Table 8: Leading UK Supermarket Chains by Turnover (£m), Years Ending 31st December 2000-2002 |
| By Sales Per Employee |
| Table 9: Leading UK Supermarket Chains by Sales per Employee (£), Years Ending 31st December 2001 and 2002 |
| By Pre-Tax Profit |
| Table 10: Leading UK Supermarket Chains by Pre-Tax Profit (£m), Years Ending 31st December 2000-2002 |
| By Ratio of Pre-Tax Profit to Turnover |
| Table 11: Leading UK Supermarket Chains' Ratio of Pre-Tax Profit to Turnover (%), Years Ending 31st December 2000-2002 |
| By Market Capitalisation |
| Table 12: Leading UK Supermarket Chains' Market Capitalisation (£m), Years Ending 31st December 2000-2002 |
| Advertising Strategies |
| Tesco |
| J Sainsbury |
| Wm Morrison Supermarkets Ltd |
| Safeway |
| 3. Financial Services |
| Introduction |
| ASDA |
| THE CO-OPERATIVE GROUP |
| MARKS AND SPENCER |
| MORRISONS |
| SAFEWAY |
| J SAINSBURY |
| TESCO |
| BRANDING ISSUES |
| 4. Pharmacies |
| Introduction |
| THE SUPERMARKETS' RESPONSE |
| CONSUMERS' RESPONSE |
| CONSUMER TRUST |
| 5. Catering |
| introduction |
| IN-STORE caféS, A POPULAR MEETING PLACE |
| 6. Internet Access |
| introduction |
| TESCO AND WAITROSE |
| SUPERMARKETS SEE BENEFIT IN ISP PARTNERSHIPS |
| 7. Home Deliveries |
| ASDA |
| BUDGENS |
| THE CO-OPERATIVE GROUP |
| ICELAND |
| MARKS AND SPENCER |
| SAFEWAY |
| SAINSBURY'S |
| SOMERFIELD |
| TESCO |
| WAITROSE |
| CHALLENGES AHEAD |
| POSITIVE PROSPECTS |
| 8. Other Services |
| AUTOMOTIVE SERVICES |
| DRY CLEANING |
| Energy |
| ENTERTAINMENT |
| FUNERALS |
| INFORMATION KIOSKS |
| PHOTOGRAPHIC AND COPYING SERVICES |
| RECYCLING |
| TELECOMMUNICATIONS |
| 9. An International Perspective |
| EUROPE |
| Carrefour |
| Carrefour España |
| Caprabo |
| THE FAR EAST |
| Mixed Fortunes in Japan |
| THE US |
| Wal-Mart Entering Financial Services |
| Ahold USA Launches Electronic Prescribing System |
| 10. PEST Analysis |
| POLITICal factors |
| The Euro |
| The Competition Commission's Report on Takeover of Safeway |
| In-Store Pharmacies |
| ECONOMIC FACTORS |
| SOCIal factors |
| TECHNOLOGical factors |
| 11. Consumer Dynamics |
| INTRODUCTION |
| Table 13: Comparison of Attitudes Towards Supermarket Services (% of adults), 2001 and 2003 |
| Analysis of results |
| S1: "I have obtained cash-back from a supermarket checkout in the past 6 months" |
| S2: "I have eaten a meal in an in-store supermarket café in the past 6 months" |
| Table 14: Cash-Back From Checkouts/ Meals in Supermarket Cafés (% of adults), 2003 |
| S3: "I have had a prescription made up in an in-store pharmacy in the past 6 months" |
| S4: "I have conducted transactions at an in-store post office in a supermarket in the past 6 months" |
| Table 15: Prescriptions in Supermarket Pharmacies/ Transactions at In-Store Post Offices (% of adults), 2003 |
| S5: "I have taken an item to be dry-cleaned in a supermarket in the past 6 months" |
| S6: "I have a credit card from a supermarket" |
| Table 16: Dry Cleaning in a Supermarket/Supermarket Credit Cards (% of adults), 2003 |
| S7: "I have a savings account with a supermarket" |
| S8: "The Internet service provider I use is a supermarket" |
| Table 17: Supermarket Savings Accounts/Supermarkets as Internet Service Providers (% of adults), 2003 |
| S9: "I have access to the Internet at home" |
| S10: "I have purchased insurance from a supermarket" |
| Table 18: Home Internet Connection/Insurance from Supermarkets (% of adults), 2003 |
| S11: "I have used a supermarket crèche in the past 6 months" |
| S12: "I have booked a holiday or short break from a supermarket travel service in the past 6 months" |
| Table 19: Use of Supermarket Crèches/Supermarket Holiday Services (% of adults), 2003 |
| S13: "Supermarkets should offer a wider range of services, e.g. dry cleaning, crèche facilities, etc." |
| S14: "Supermarkets should just concentrate on selling food, rather than offering additional services" |
| Table 20: Should Supermarkets Offer a Wider Range of Services (% of adults), 2003 |
| 12. Company Profiles |
| ASDA GROUP LTD |
| Corporate Strategy |
| Profitability |
| Table 21: Financial Results for ASDA Group Ltd (£m), Years Ending 7th January 2000, 6th January 2001 and 31st December 2001 |
| Recent Developments |
| THE BIG FOOD GROUP PLC |
| Corporate Strategy |
| Profitability |
| Table 22: Financial Results for Big Food Group PLC (£m), Years Ending 1st January 2000, 31st March 2001 and 31st March 2002 |
| Recent Developments |
| BUDGENS LTD |
| Corporate Strategy |
| Profitability |
| Table 23: Financial Results for Budgens PLC (£m), Years Ending 30th April 2000, 29th April 2001 and 28th April 2002 |
| Recent Developments |
| CO-OPERATIVE GROUP (CWS) Ltd |
| Corporate Strategy |
| Profitability |
| Table 24: Financial Results for Co-operative Group (CWS) Ltd's Food Retailing Division (£m), Years Ending 31st December 2000-2002 |
| Recent Developments |
| MARKS AND SPENCER PLC |
| Corporate Strategy |
| Profitability |
| Table 25: Financial Results for Marks and Spencer PLC (£m), Years Ending 30th March 2001, 31st March 2002 and 29th March 2003 |
| Recent Developments |
| WM MORRISON SUPERMARKETS PLC |
| Corporate Strategy |
| Profitability |
| Table 26: Financial Results for Wm Morrison Supermarkets PLC (£m), Years Ending 4th February 2001, 3rd February 2002 and 2nd February 2003 |
| Recent Developments |
| SAFEWAY PLC |
| Corporate Strategy |
| Profitability |
| Table 27: Financial Results for Safeway PLC (£m), Years Ending 30th March 2001, 31st March 2002 and 29th March 2003 |
| Recent Developments |
| J SAINSBURY PLC |
| Corporate Strategy |
| Profitability |
| Table 28: Financial Results for J Sainsbury PLC (£m), Years Ending 1st April 2000, 31st March 2001 and 31st March 2002 |
| Recent Developments |
| SOMERFIELD PLC |
| Corporate Strategy |
| Profitability |
| Table 29: Financial Results for Somerfield PLC (£m), Years Ending 29th April 2000, 28th April 2001 and 27th April 2002 |
| Recent Developments |
| TESCO PLC |
| Corporate Strategy |
| Profitability |
| Table 30: Financial Results for Tesco PLC (£m), Years Ending 26th February 2001, 24th February 2001 and 23rd February 2002 |
| Recent Developments |
| WAITROSE LTD |
| Corporate Strategy |
| Profitability |
| Table 31: Financial Results for Waitrose Ltd (£m), Years Ending 27th January 2001, 26th January 2002 and 25th January 2003 |
| Recent Developments |
| 13. The Future |
| POSITIVE SIGNS FROM THE ONLINE CONSUMER |
| FUEL FOR THOUGHT |
| THE 'BIG FIVE' MAINTAIN THEIR EDGE |
| GROWING LEVELS OF CONSOLIDATION |
| 14. Further Sources |
| Associations |
| Publications |
| General Sources |
| Bonnier Information Sources |
| Government Sources |
| Other Sources |
Text © 2003 Key Note
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