Like Walmart is in the US, Tesco is a large retail firm in the UK. As of 2017 end, it is the largest UK retail chain and has a huge revenue and footprint. Tesco is known mainly as a grocery and general merchandise retailer and basically sells everything under the sun where grocery and merchandise are concerned. Because of its popularity, there are many Tesco competitors.
Tesco has close to 7000 stores across the world and the number of stores is growing steadily. Its major presence is in the UK only. Tesco is a public limited company. It started small but in the 1990’s when retail went through a revolution, Tesco capitalized on it and instead of being a small retailer with penetrative pricing, it became a value based retailer and has numerous retail formats in its repository.
With such strong presence, Tesco leads in the UK market and has a majority market share of 28% as of 2017. The UK market is divided into 4 main brands – Tesco, Sainsbury’s, Asda and Morrisons. These 4 brands heavily compete within themselves. The other brands are far behind but there are total 9 Tesco competitors who must not be taken lightly. Which are they? Let us find out.
Top 9 Tesco competitors
As of May 2017, Sainsbury is known to be the 2nd best retailer in the UK with a market share of 16.1%. The 2nd spot is a constant struggle between Asda and Sainsbury’s. Sainsbury’s is behind Tesco by at least 12% and hence has a huge ground to cover. Sainsbury is known for its experimentation with store layouts as well as being customer friendly and even charging a premium because of its brand strength.
Sainsbury’s is known to have more number of stores then Asda (1304 stores in total) although the number of supermarkets with Sainsbury’s are lesser. Sainsbury’s is known more for its convenience goods stores. Its online store business is booming and hence it is considered as a Tesco competitor not only for its offline sale but also its online market. Sainsbury’s also has a benefit of deep pockets because its holding company J Sainsbury PLC owns the Sainsbury’s bank and other businesses.
Although Asda is currently the third largest retailer in the UK and the 2nd highest amongst Tesco competitors, the most potential to gain the number 1 spot lies with Asda.Asda has a 15.7% market share as of 2017.Asda is a wholly owned subsidiary of Walmart and is known for its penetrative pricing as well as the huge number of supermarkets that it has.
Asda is known to expand year on year in the number of stores it owns. It owns a total of 604 stores but a majority of those stores are supermarkets. Asda’s slogan “Save Money. Live better” is a further proof that it is based completely on the style of Walmart which has the famous tagline“Every day low prices”.
Asda has some of the largest Hypermarkets in the UK making it the destination of choice for many shoppers. Asda had great plans of having even more supermarkets but the 2010 recession stopped the retail chain in its tracks. A major flaw in Asda’s business plan is it has half the number of stores as compared to Tesco and Sainsbury but has a fantastic revenue generation methodology with its sales price. As Asda gradually increases the number of stores, it will become one of the most formidable Tesco Competitors.
Morrison’s is the 3rd highest Tesco competitors and takes away approximately 10.7% of the market share from Tesco. The competitive advantage of Morrison’s is its vertically integrated supply chain. While Tesco and other retailers are purely retail, Morrison’s has its own manufacturing facilities too, products which it sells through its retail stores.
Morrison’s also has tie-ups with a huge number of farmers and grocery suppliers who supply directly to Morrison’s and thereby the cost of distribution is reduced. This cost is transferred as savings to the end customers and because of the savings which consumers can get from Morrison’s stores, Morrison’s is quite popular.
The company had limited distribution to 2004 but after 2004 and the acquisition of Safeway, Morrison’s has expanded across the whole of UK and has at least above 700 stores running. Morrison’s has more than 500 Supermarket. Morrison’s is making a slow move towards more convenience stores then hypermarkets and is looking to expand convenience stores across the UK.
4) The Cooperative
The Cooperative group has a 6.6% presence in the food and grocery market and if considered as a Tesco competitor, it takes away 6.6% of the market away from grocery and retail. The Cooperative group is present in multiple segments – Electrical retail, Financial retail, Food retail, insurance and legal services and others.
The Co-op food is the largest division of the Cooperative group and many convenience stores, mid-sized supermarkets and only a few larger supermarkets. It has close to 2700 stores of various sizes. The Co-op food supplies food products to other consumer co-operatives within the UK as well.
The Co-op group is not a direct competitor of Tesco because it does not have a profit focus but more of a cooperation focus. However, due to its market share in the food business, it is considered as one of Tesco competitors.
5) Aldi – 6.2%
Aldi is a Germany originated retail firm which is known for its massive presence in more than 10,000 stores across 18 countries. Aldi is very different from the traditional retail stores. While traditional retail stores put a lot of importance to customer delight and satisfaction, Aldi as a retailer pays more focus on the products it offers and the price at which they are offered.
Aldi has a huge range of private label brands and products which it has on offer. These private label products are sold at very low prices and to reduce the cost of the product, Aldi implements many strategies including keeping very low staff in the store and keeping cost to a minimum. Aldi was initially formed as 2 different companies starting with the name of Aldi, but both the companies merged to form the Aldi retail store.
In the UK, Aldi has a market share of 6.2% which is very close to that of Waitrose. However, the brand image of Waitrose is far different then Aldi. While one appears to be almost a premium retailer, Aldi is known to be a penetrative retailer with the focus on cost control and not much focus on customers or brands. It is more of a brand for the masses.
Waitrose is the 6th highest amongst all Tesco Competitors and is known to be more of a branded retailer. Waitrose has such a reputation that it has a royal warrant which is a big thing in the UK – wherein the retailer can supply the wares to the Queen and the royal family. Although it has a premium brand image, the prices of Waitrose are competitive.
Waitrose has a 5.1% market share of UK’s retail and grocery market as of 2017. It mostly operates through supermarkets across the UK and also has its own online store. Some online stores work in tandem with offline wherein the order is taken online but the product delivery and product service are given through offline stores.
Waitrose is trying hard to overcome its “pricey” brand image and is launching various campaigns and innovative ideas to leave the image behind and to attract more customers on the basis of price.
7) Lidl – 4.5%
Lidl is very similar to Aldi and both of them originate out of Germany with practically a very similar business offering. However, the major feature in which Aldi and Lidl are different is the brands that they sell.
While Aldi sells mainly private label brands sourced from various countries, Lidl controls the cost by sourcing brands locally from local manufacturers and offering the same brands at low prices to attract customers. Lidl has a 4.5% market share in the UK and is ranked 7th amongst all Tesco Competitors.
8) Iceland foods – 2.1%
Iceland foods is one of the Tesco Competitors because it supplies packaged and frozen foods in the UK. It is specifically focused on selling of frozen foods including packaged food items, meat, fish, poultry and all other variants of packaged and frozen foods. Although the emphasis of Iceland foods is on frozen food, it does sell other non-frozen food items as well.
Iceland foods regularly run promotions to promote its product and sale in the market. One of the most common forms of promotions is to offer larger portions of the product at the same price of the product. Iceland also uses marketing to an advantage by sponsoring events and using ATL and BTL marketing.
9) Small retail &Other Franchise’s – 4%
Any market has the presence of small-time retailers who are present in the market. These small-time retailers and franchises are generally convenience stores and are rarely supermarkets. Even if they are individual supermarkets, they are more used due to ease of access rather than their price advantage. Overall, in the UK small retail and other franchises occupy 4% of the market and hence these small retailers are direct Tesco Competitors.