2022 Exams - Industry Profiles - The UK Supermarket Industry
- AS, A Level, IB
- AQA, Edexcel, OCR, IB, Eduqas, WJEC
Last updated 7 May 2022
In this revision video we look at the oligopolistic but increasingly contestable UK supermarket industry.
The UK retail grocery sector is probably best described as a contestable oligopoly. In recent years, the dominance of the Big 4 (Tesco, Asda, Sainsbury and Morrisons) has come under increasing threat from the deep discounter chains headed by Aldi and Lidl. In January 2017, these two businesses had a combined market share of 10.7% in the UK. By April 2022, this had grown to 15.4%. These businesses have a different business model based on rapid organic growth and a range of cost-strategies designed to allow them to sell at low prices.
Revising the UK supermarket sector as a case study might encourage you to think about:
- Different business objectives & pricing strategies of key firms
- Organic versus external growth of businesses
- Sources and impact of internal economies of scale
- Extent and significance of barriers to entry in the industry
- Changing spending patterns of consumers post pandemic
- Supermarkets and the labour market – monopsony power?
- Supply chain problems and responding to cost-of-living crisis
The pattern of grocery shopping in the UK is changing and are likely to continue evolving post pandemic. Sales growth in hypermarkets is slow / flat whereas sales growth with discount stores and smaller convenience store formats are stronger. The pandemic accelerated the switch to online grocery shopping which has consequences for supermarket costs and also for a number of occupational labour markets. Sales at city centre convenience stores have collapsed.
Supermarket hourly wage data (April 2022)
Aldi: New employees get £10.10 an hour, rises to £10.57 after three years
Within the M25, the minimum pay has risen to £11.55 per hour
Lidl: £10.10 an hour; London £11.30. Can rise to £11.40 or £12.25 with experience
Morrisons: £10.00 per hour
Marks and Spencer: £10.00 plus workers get free health checks. (£11.25 in London)
Sainsbury's: £10.00, Outer London £10.50, £11.05 in inner London.
Asda: £9.66 (London £10.83)
Other perks for workers include 10% off Asda groceries and George items, and 20% off Food to Go items in store and petrol filling stations.
Tesco: £9.55 per hour, Night Premium Payments for eligible colleagues of £2.30
There are big wage pressures on UK supermarkets in 2022:
- Shortages of lorry drivers
- Shortages of distribution centre workers
- Record number of job vacancies in the UK labour market has shifted the balance of wage bargaining power back towards workers
- Most supermarkets now pay above the national minimum wage for their employees although only a few pay the Living Wage
- Pressure on supermarkets to look for cost savings elsewhere including cutting back on 24 hour opening, more self-service checkouts, removing layers of salaries staff management
Why are Aldi and Lidl so much cheaper?
Smaller range of items – bulk purchased from manufacturer
Most products are private label rather than branded
Branded goods tend to discontinued or overstock products – bought at a discount
Smaller stores in locations with cheaper rents (fixed costs)
Energy efficient lighting, commitment to renewables
Smaller ratio of staff to customers – higher MRPL
Relatively small marketing spend (fixed costs)
Shorter opening hours (avoids unsocial hours payments)
You might also like
Exam support for 2022
Online Grade Booster Courses for A-Level Exams in May & June 2022
Exam technique, advance information support, live revision and more from the tutor2u subject specialist teams