Dissertation Discussion Chapter 5

The strategy of Tesco gives them a managerial advantage to them in both the short and the long run. Tesco’s marketing and retailing strategy is quite distinctive from other small and general retailers of the United Kingdom. This strategy of Tesco is directly affecting the sales of small retailers because they are unable to cope with the rapid growth of Tesco. Their operational excellence is so high and there prices are low that is the reason why small retailers are unable to attain customer satisfaction in the short run (U Talk marketing 2010). However, experts and analysts actually believe that price can not be considered as an influential factor because the big five retailers have attained excellence in the scenario of price and they are now fighting for the contents of housewives purses. The experts actually believed that in the scenario of Tesco there are two major strengths of this organisation that are creating problems for small retailers. These two major strengths are enormous value of the brand and market leadership of this brand can be considered as strength. However, the major difficulty small retailing brands are facing as based on the scenario of prices because the prices of Tesco are extremely low and customers prefer this brand.

An individual who operates the Landmark group of wholesalers, branded the Big Four a "cartel" for the way they have free rein to divide the grocery market among themselves. His members are concerned they will have no shops to serve if small convenience stores persist to close at the current rate of 2,000 a year.

Bob Russell, a Liberal Democrat on the All-Party Small Shops Group, compared the high street to the Premier League. "There are lots of teams but only the top four compete," he said. 
Demanding policies to encourage "greater fairness" in the grocery marketplace, the ACS requested the committee to advocate a ban on below-cost selling. As the mananger who runs the North Yorkshire-based, five-strong Proudfoot chain of supermarkets, said in his submission, small shopkeepers are unable to compete below-cost selling. This is when big factions –such as Tesco - make use of their buying influence to present considerable discounts in specific areas to endorse a new store.

Early last year, Tesco gave £8 money-off vouchers for every £20 spent in their latest Withernsea store near Hull - a 40 per cent discount across a variety of products. "Whereas we used to be a thriving part of the high street, we are now a marginal business," the owner of Proudfoot said. "My predicament is caused directly by Tesco using their scale - something I am unable to match - directly against me."

Professor Alan Hallsworth, an authority in retail management, at the University of Surrey, who is due to give proof next week, said: "My concern is whether you should use your buying power in one sector - the supermarket sector - to give low prices in another sector - the convenience sector." The big groups supply directly from abroad, rather than rely on home wholesalers, and so they can charge customers not as much for products than a smaller competitor pays a wholesaler to supply them.

But Professor Hallsworth is concerned that the investigation is too little, too late. "The horse may have bolted. There was a lot of variety 25 years ago but a lot of names on the high street have already disappeared." A recent survey by the New Economic Foundation, an autonomous think-tank, discovered almost half of UK high streets have been "cloned" by a handful of retailers.

For proof, MPs need look no more than across the road at the Tesco Express that has taken the place of Cullens above Westminster Tube station. Tesco's acquirement two years ago of Adminstores, the owner of Cullens and Europa, increased its existence radically in central and west London, making it impracticable to avoid the chain in certain well-heeled areas.

Tesco's deliverance, as a spokeswoman repeated yesterday, is that competition authorities are content to look upon the grocery sector as two separate markets: for "one-stop" and "top-up" shopping. This means that even though on some processes it has more than a 30 per cent share of the grocery market, it has "just 6 per cent of the convenience sector". She added: "Previous competition inquiries have found the market is fiercely competitive."

Mr Rae wants the all-party group to advocate the beginning of incentives to support budding retailers starting out, such as a level tax rate for the first year. He also wants better help for retailers that wind up as the sole enduring shop in a region. The ACS recently stepped up its battle against the main supermarket groups, taking their argument to the Competition Appeal Tribunal after failing to persuade the Office of Fair Trading to examine the grocery market.

The Federation of Small Businesses, which put its case at yesterday's trial, wants the Government to re- investigate supermarket business practices. Although a current OFT enquiry concluded the active code of conduct that rules relationships between suppliers and supermarkets works perfectly, hardly any industry insiders believe this to be so. John Murphy, the chief executive of the Federation of Wholesale Distributors, said: "The word in the trade is it's a joke. It has no teeth."