Tesco | Sector Overview

GENERAL RETAIL

sector Overview:

The supermarket and the one-stop-shop transformed the dynamics of the food and general retail sectors. Pioneered by the likes of Sainsbury’s, Safeway, Carrefour and Wal-Mart, the advantages are clear; securing large volume discounts allows supermarkets to under-cut traditional stores and greater space means they can offer as good if not better selection of produce. In recent years, there has been a focus on multi-format capability and blurring of formats as retailers ‘mix and match’ to increase effectiveness and offer customers a reason to shop at their stores. Linked to issues such as out-of-town planning constraints this has led to consolidation including the opening of smaller stores within communities, the incorporation of pharmacies, post offices and travel agencies, joint retail ventures with the likes of BP, Shell and Exxon and the growth of on-line shopping. In addition, the rise of own-label products and an increasing migration to non-food have fundamentally changed the product mix. By 2010, the value of the European private label market is forecast to reach €430.8 billion, up from €298.1 billion in 2005.

With price deflation and commoditisation a threat in most markets, genuine innovation remains the key for many retailers. In more mature markets there is a growing appreciation that a 'one size fits all' approach is no longer valid. Some retailers are adapting by focusing on other differentiation than just price using new channels to develop tailored products and services to suit more sophisticated customer requirements. Growing consumer spending and a hunger for modern retail in emerging markets such as China, India and Russia also provide significant opportunities for growth. Large international and regional grocers are acquiring market share across the world at a remarkable rate with the top 100 retailers already capturing 45% of the world's modern grocery distribution. Companies like Wal-Mart, Ahold, Carrefour and Tesco now face the challenge of managing increasingly complex supply chains, building critical volume in different countries and maintaining comparable levels of product quality and customer experience.

ONES WE ARE WATCHING

Wal-Mart
The world’s largest retailer has been through a number of challenges over recent years but is now making a major success of its innovation focus on the sustainability agenda: Wal-Mart has an ambitious strategy to reinvent itself as a champion of the environment. The company plans to eliminate 30% of the energy used in stores, reduce solid waste from its U.S. stores by 25% within three years, and invest up to $500 million in sustainability projects. Wal-Mart is creating competition in its supply base around being green that is already having significant impact on innovation in packaging and waste management.

WuMart
At the other end of the scale at the moment, China’s WuMart is seen by some as the future of retail. The company has only been around since 1994, and although only having $320m of sales and 500 stores at the moment, this is one of the fastest growing retailers in China with grand expansion plans and a different take on customer service. The company tailors stores to suit local tastes and fresh food is a major feature, aware, for example, shoppers can pick live fish to have for dinner. With 700% growth predicted for retailing in China alone over the next decade, WuMart is intent of having a major role in this.

Adidas
Apple
Aviva
BASF
BMW
Boeing
Cannon
Google
Handelsbanken
H&M
Infosys
LEGO
Lilly
Medtronic
Microsoft
Nokia
NTT DoCoMo
PepsiCo
Reckitt Benckiser
Samsung
Shell
Starwood
Tesco
> Company Profile
> Innovation Scorecard
> Sector Overview
> Innovation Drivers
UPS
Virgin Atlantic