UK Supermarket Wars 2014-2020: How it started, who's winning, and why

UK Supermarket Wars 2014-2020: How it started, who's winning, and why

[STOP PRESS September 22, 2020. Results are now in. The author predicted that the combined market share for Aldi and Lidl would increase from 8 per cent in August 2014 to 20 per cent in August 2020, and that of the Big Four would reduce from 73 per cent to 61 per cent. The actual results are halfway there. Aldi and Lidl’s share increased to 14 per cent and the Big Four’s share reduced to 66 per cent. See https://www.kantarwordpanel.com/grocery-market-share/greatbritain for details. The author says that these results show his analysis was correct but the timing was out. Based on these actuals, the prediction should be achieved sometime in 2025.] Background to this book: After more than twenty years of the internet, bricks-and-mortar retailers have started to buckle. The data shows that up to a third of shopping will be online by the start of the 2020s, so that up to a third of bricks-and-mortar retailers may have to close their doors. Thus far the grocery sector has been immune to the internet threat. Yet, even here, the dynamics have changed. It’s not enough for the traditional bricks-and-mortar supermarket to get an online presence: they still have to compete with a new type of bricks-and-mortar discounter on the High Street. In this book, the author shows how two supermarket groups from Europe are helping themselves to the market share of the Big Four and why they can’t be stopped. It has little to do with ‘buying power’. This new retail paradigm is to have a small footprint and fast shopping – less space and more speed.The secret is that it lowers the fixed cost structure of each store – running costs such as rent and wages – by up to a third. These stores can afford to slash gross margins and thus selling prices. The traditional grocery chains can’t compete. The book starts with a primer on the UK grocery business. It shows how the cost structure in the sector sets limits on what firms can do. It then applies concepts devised by two of the world’s top strategists to show how the traditional grocery groups are being disrupted through innovation by the upstarts from Europe. The author uses one of the simplest formulas yet devised – Little’s Law – to show how and why fast shopping works. This flow-rate formula underpins key concepts in diverse fields such as business strategy, supply chain management, operations planning, reengineering, project management, constraint theory, and lean thinking. The book also goes into how some supermarket groups might have made their own plight worse through groupthink, strategic drift, financial engineering, short-termism, too much debt, and undue pressure on suppliers and staff. In 2014 the author made startling predictions of market share in 2020 for this sector, based on his hypotheses. So far the predictions are on track, and can be checked online. Even if the author’s views are only half right then this controversial yet clear guide is a must-read for anyone in retail.