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The future of independent food retailers in the United Kingdom

The future of independent food retailers in the United Kingdom

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Introduction

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Future trends in the operations of retail business in the United Kingdom is a little bit hard to tell owing to the fact that it is the state of the economy that dictates how consumers spend their monies. Taking for instance the argument of Berdegué (2001), the recent economic crisis of 2008, it has never been easy to precisely predict the course of destiny that a particular line of businesses is going to adapt. Only about two years ago, people could stay loyal to particular brand of commodities but at present the same people are being forced into buying own brand products and this practice is prevalent especially in the food retail sector. Trends in the modern world of business have it that to remain competitive, business organizations have to device innovative strategies that can enable them drive their competitors out of the competitive edge (Berdegué, 2001).

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Burt & Sparks (2003) have also documented that, the retail businesses especially those engaged in food products have to be competent enough so as to marginally increase their market shares as well as their sales volumes. Independent food retailers are fast diminishing from major United Kingdom market. The retail industry in this country is fast changing and if the current trend maintains its pace, independent retail food stores will be a thing of the past in the near future (Burt & Sparks, 2003). Most of these stores which in just less than three decades ago dominated the market have quickly paved way for large stores such as supermarkets and hypermarkets. Unfavourable government policies have been cited to be responsible for this countrywide transformation of the retail food industry. Another reason to account for this is the influence from other countries and in particular the USA where the need to keep self-service retail stores is the order of the day (Ponte, 2001).

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Cox, Ireland, Lonsdale, Sanderson & Watson, (2002) indicate that there were less than three scores supermarkets in the whole of the United Kingdom in the few decades following the end of the Second World War. Incidentally, it is around this time, the growth of personal consumption reached its peak. In less than half a century, this number, this number has skyrocketed and as of now, (2010) there are well over eight thousand supermarkets and hypermarkets in Britain (Cox, Ireland, Lonsdale, Sanderson & Watson,2002). This figure is amazing considering the fact that the dominance of supermarkets takes its toll on retail, businesses which in spite of their small size contribute a lot to the general welfare of the local communities and by extension the growth of the country’s economy. The lucrative independent retail market that was once filled with bookshops, food stores, pubs, bakers, groceries and such like other businesses has in just in a matter of time been replaced with new forms of business enterprises, that is the large retail stores.

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Morisset, (1997) argues that, the future of independent retail food stores in the United Kingdom is hanging on a balance. A typical supermarket or any other large store is capable of influencing the local community in a number of ways and in the process offer several benefits and incentives which have the potential to attract loyalty from them. Some of these benefits and incentives like employment, development of infrastructural facilities and availability of fresh products are far beyond the reach of independent retail stores. These benefits have the potentiality to dispel the supremacy of independent retail stores from the places where they have taken roots (Morisset, 1997).

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Speculations by Gereffi (1994) indicates that if the growth rate in respect of establishment of new large retail stores continues as it is currently, then there is going to be a crisis in the independent retail business industry in a little while. The food sector seems to be worst hit by such an eventuality, whose advent is major cause of concern not only for independent retail entrepreneurs but also relevant government agencies as well. One independent research conducted way back in 2000 revealed that the number of independent retail food stores in the United Kingdom had fallen by over 80 per cent in just fifty years spanning from 1960 (Gereffi, 1994). More amazing is the fact that the number of independent retail food stores that have been closing down each year has been on the increase ever since that research was conducted.

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According to McCulloch & Ota, (2002), on the optimism side, the independent retail food industry is likely to maintain its marginal position and will thus continue to be a crucial aspect of the retail industry. But the wider retail industry is bracing for serious transformations some of which will spell demise to some of the retail businesses as has been witnessed in the recent past (McCulloch & Ota, 2002).

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That notwithstanding independent retail food stores shall continue to play a significant role in the retail food market in the United Kingdom even with the advent of super stores and hypermarkets. Food production is increasing not only in the United Kingdom but generally in the whole world and in most of these countries; the process is controlled by a small number of multinational corporations.

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The power of the United Kingdom supermarkets

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Over the last forty years, McDonald, (1999) have indicated that, food sales in the United Kingdom have shifted from small independent stores to large supermarket chain stores. Supermarkets in the United Kingdom began to gain popularity and eventual acceptance in the 1960s and this was aided by abolition of retail price maintenance and also increased post war affluence and need for increased consumption. In the recent past changing lifestyles have also contributed to the success of supermarkets all at the expense of independent retail stores. Researches indicate that by 1960, independent retail businesses had about 60 per cent share of the of the entire retail food market (McDonald, 1999). This share has since then dropped to only 6 per cent currently and the worst is that it is expected to reduce even further. A report by the New Economist Foundation says that Britain is currently witnessing the death of its small and independent retailers as a new form of retail feudalism emerges with just a handful of brands taking over the shopping.

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According to Grievink, (2003), recent announcements of Morrisons Supermarket’s take over of Safeway supermarket has dealt a deadly blow to the small food retail businesses as the takeover will no doubt result in a concentration of grocery markets in the United Kingdom. Already, the entire retail food industry is dominated by only four supermarkets namely, Tesco 25%, Sainsbury 17 %, Asda-Walmart 16 % and Morrisons 16 % (Grievink, 2003). This makes about 75 per cent dominance. The continuing concentration of huge retail outlets in the United Kingdom has created a situation where a very small number of supermarket chains ruthlessly exploit their monopoly of the buying power to lock out small and independent retail food stores. Food suppliers, especially farmers are finding themselves in extremely very weak negotiating positions and as such are getting less than the actual costs of production.

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Success of supermarkets in the United Kingdom and failure of independent retail food stores

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According to Clay, (2004), the reason why supermarkets are so successful not only in the United Kingdom but also in other countries is a rather simple one, convenience. Just like customers in other countries, British customers just want to be in and out; no time to linger about for hours on end looking for their favourite brands. The general idea behind the setup of most United Kingdom grocery stores is to allow customers to easily walk around and select the items that they want to buy (Clay, 2004). All items appear to be enticing and unless one comes with a premade list of items, chances are they may leave with more than they thought possible. This privilege as provided by large food stores lacks in the United Kingdom independent food stores, an attribute which is responsible for their self destruction.

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Dries, & Swinnen, (2004) found that, only multinational food retailing corporations and companies with reputable brands have the leverage to engage big food retailers in the United Kingdom. British supermarkets have brought their buying powers and monopoly to bear on producers not only with respect to prices of commodities but also through supply chain management (Dries, & Swinnen, 2004). This is enhanced through their systematic control of the of the whole food supply chain. Their use of highly sophisticated systems of contracts and specifications coupled with tighter managerial control to monitor the supply chain is the simple logic behind their success and dominance of the retail food market. Their mode of operations is what the United Kingdom consumers like (Oxfam, 2004). Using favoured slaughter houses, popular packing and processing companies and the development of the retailer’s own brands for different food products by supermarkets have worked marvellously to drive independent retail food stores out of the market (Hu, Reardon, Rozelle, Timmer & Wang, (in press)..

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According to the findings of Farina & Monteiro, (2004), Tesco supermarket was the first one eve in the history of United Kingdom food retail market to bypass live auction markets and buy cattle directly from farmers. As of now all major supermarkets in the United Kingdom directly buy cattle from selected framers. The thing here is that these supermarkets avoid high auction costs and therefore their products are sold at cheaper prices compared to independent food retailers who have to pass on the auction costs to the consumers (Farina & Monteiro, 2004). Hildred & Pinto, (2002) also argues that naturally these independent food retailers stand no chance of competing with the giant retailers. The closed contact production system has become has become an essential part of the livestock and produce industry in the United Kingdom such that the traditional methods of selling farm produce through wholesalers and middlemen is in a very serious decline. This is partly due to the increased retail food competition and also rising hygienic standards following Britain’s entry into the European Union (Hildred & Pinto, 2002). This has also been the case because the big market chains have been successful in forcing farmers into directly supplying their products through popular supplying agents.

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Remedial strategies

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Gillson, Green, Pandian & Wiggins, (2004) argues that majority of the United Kingdom citizens have their favourite supermarkets from where they buy their food products. Most of them are familiar with their favourite supermarkets’ layouts and frequent them very often as need arises. No matter what their reasons for stopping by the stores are, they very well understand what their wants are and how they can be satisfied. United Kingdom supermarkets avail the comfort of the shoppers to just know where their products are. Unlike large scale food retail stores, majority of independent food retailers in the United Kingdom are faced with the greatest problem of getting enough customers to keep their businesses running (Gillson, Green, Pandian & Wiggins, 2004). Most of their retail store marketing strategies have failed to produce the required results and thus they have been forced to look for alternative strategies and resources that can help them get noticed and pull more customers into their stores.

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Muñoz Cruz & Canedo, (2004) have identified that, for an average independent store, the cost of acquiring and maintaining new customers can be quite high. Most of the independent food retail stores do not have marketing budgets like the big market stores and mega chains. For these businesses to survive, they will have to adopt using smart, low cost and creative marketing strategies (Muñoz Cruz & Canedo, 2004). One thing is certain, the independent stores do not stand nay chance of attracting customers to their businesses right away but nevertheless need to make key changes in respect of their modes of operation. Continuing to use the same traditional strategies will only serve to give the same results. Without enough customers, the longer term future of independent retail food stores in the United Kingdom is doomed to fail.

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Östensson, (2002). Indicates that, in spite of that there are several proven and time tested retail marketing strategies which if adopted well by the independent retail stores of the United Kingdom can result in increased number of customers and hence high business volumes. Each particular retail business will require a particular marketing strategy that best suits its operations and range of products and so choosing the right marketing and operational strategy can go a long way into increasing the level of customer flow and also building a steady stream of regular customers for a business (Östensson, 2002).

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