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Economics

Study Notes

Oligopoly - Market Shares and Competition in the UK Food Grocery Industry

Level:
AS, A Level
Board:
AQA, Edexcel, OCR, IB

Food grocery is widely discussed as an example of a competitive oligopoly.

The chart below shows the changing market share for the major grocers over recent years.

The dominance of Tesco as the leading retailer in the UK has been challenged. In part this comes from the rapid growth of deep discounters such as Aldi and Lidl who in November 2014 had accumulated an 8.4% market share, up from 6.95 in the autumn of 2013.

Statistic: Market share of grocery stores in Great Britain from November 2013 to August 2014 | Statista|Statistic: Market share of grocery stores in Great Britain from November 2013 to August 2014 | Statista
Find more statistics at Statista

Supermarkets use a full range of price and non-price competition strategies to grow and protect their market share:

  • Price discounting on selected ranges
  • Price matching schemes offering coupon discounts for customers on their next shop based on price comparisons of the baskets that flow through the checkouts
  • Product differentiation e.g. a growth of own-label products sold at a discount to premium brands, economy / value products and movements in non-food sales
  • Product bundling - the staple of competition is to offer bundles of products sold together at an attractive discount
  • Coupons for cheaper petrol for a minimum spend in-store
  • Longer opening hours
  • Click and collect - order online and collect in store
  • Joint ventures with other retailers such as in-store dentists, catalogue stores, post office, dry cleaning
  • Free car parking and free bus services

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