TESCO

Every little helps

THE GLOBAL MARKET LEADER OF  ONLINE GROCERY

RETAIL

A Report on Tesco.com’s
Online Grocery Retail Business in UK
Recommendations to Sustain Growth in Recession

By: Mukesh Kumar

ID: 08050848
Course: MBA
Module: MNP058N
(Economic & Global Context)
Economic & Global Context - MNP058N - MBA Mukesh Kumar

Table of Contents

1. Introduction...........................................................................................................................3
2. Online Grocery Retail Market in UK......................................................................................3
2.1 Advent of Technology in Grocery retailing..............................................................3
2.2 Use of Broadband....................................................................................................3
2.3 Current Economic State of UK.................................................................................4
2.4 Market Players.........................................................................................................5
2.5 SCP Model................................................................................................................6
2.6 Porter’s Five Forces Model......................................................................................7
3. Tesco.com............................................................................................................................10
3.1 Strategic Positioning..............................................................................................10
3.2 Competitive Advantage.........................................................................................11
4. Recommendations...............................................................................................................11
5. Conclusion...........................................................................................................................13
6. References...........................................................................................................................13
7. Bibliography.........................................................................................................................14
8. Appendix..............................................................................................................................15
1. Market Share...........................................................................................................15
2. SWOT of Tesco.com.................................................................................................15
3. Online Consumer Spending data in UK...................................................................16
4. Broadband Usage Table...........................................................................................16
5. Growth Story Chart..................................................................................................16
6. Financial Performance of Tesco.com.....................................................................17

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1. INTRODUCTION

This report attempts to gain an insight into the online grocery retail market in UK and
its biggest player “Tesco.com”, in order to investigate & analyses the market using
SCP model and Porter’s five forces model (Porter, M. E., 2004). Statistical data is
used wherever necessary to substantiate the claims made. Recommendations are
made with respect to the current ‘Competitive Advantage’ (Porter, M. E., 1998) and
‘Strategic Positioning’ of Tesco.com in the light of current economic recession, and
the resultant change in consumer behaviour & shopping preferences. SWOT analysis
of Tesco.com and other market data is also provided in the Appendix.

2. ONLINE GROCERY RETAIL MARKET IN UK

The UK online grocery market is part of the overall grocery market, and is a little
more than a decade old. Online retail market began with the dotcom boom in 90s
and is in its second phase after dotcom bust of 2000. Online retailing is entirely
dependent on a few factors of success in the online market, most importantly
Technology & Physical Distribution. (Key Note, 2007).

Total estimated size of online grocery market in UK is £4.2 billion of which Tesco.com
controls about 60% share alone (Mintel, 2009).

2.1 Advent of Technology in Grocery Retailing

Technology is the key driver of online grocery retail business in UK. Companies are
using websites and IT infrastructure to support & manage orders, payments, and
distribution of goods. Sophisticated systems are used to gather consumer
intelligence by analyzing the patterns of consumer spending and buying based on
numerous parameters. RFID systems are used for stock-picking & replenishments of
stocks (Datamonitor, 2008a).

2.2 Use of Broadband

The UK has Europe’s second-highest and the world’s fifth-highest number of

Broadband subscriptions (Key Note, 2007). At the present time, the UK is considered
to have one of the world’s most developed Internet grocery market with the world
leader Tesco.com based here.

(For UK broadband usage table for years 2002-2006 refer to Appendix 4)

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2.3 Current Economic State of UK

Declining GDP

Real GDP quarterly growth since 2003 Q4

Source: http://www.statistics.gov.uk/cci/nugget.asp?id=192

UK Economy contracted by 1.6% in Q4 2008, and has declined further in Q1 2009

(ONS, 2009). There is a changing trend in the economy primarily due to the credit
crunch and ongoing recession. Since Q4 of 2007 economy has been on decline,
which has a direct and severe impact on consumer spending on groceries and their
buying behaviour (ONS, 2009).

Inflation
Annual inflation rates - 12 month percentage change

Inflation (CPI) up to 3.2% RPI down to 0.0%

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Source: http://www.statistics.gov.uk/cci/nugget.asp?id=19
The largest upward pressure on the CPI annual rate came from food and non-
alcoholic beverages (ONS, 2009). The largest individual factor was the price of
vegetables which rose by more than a year ago. There were smaller upward
pressures from fruit, mineral waters, soft drinks and juices, bread and cereals, and
meat, partially offset by coffee, tea and cocoa where prices fell this year but rose a
year ago (ONS, 2009).

2.4 Market Players

In online grocery retail market Tesco.com has been the leader in UK (Datamonitor,
2008a) ever since the dotcom revolution, followed by other big online retailers
namely Ocado, Sainsbury’s, ASDA, and Waitrose.

Initially, Tesco.com had about 80% of Online Grocery retail market in the year 1996,
which has declined to about 60% in 2006 (Datamonitor, 2008a).

Only top 5 supermarkets namely Tesco.com, Ocado, Sainsbury’s, ASDA and Waitrose
dominate the online grocery retail market, accounting in 2006 for an estimated
(Concentration Ratio) 90.5% of total online sales (Key Note, 2007). Ocado does not
have retail stores unlike others.

(Ref. Appendix 1 - market share of Tesco.com)

Total UK online grocery market trend by value (£ millions) at current prices years
ending December 2002-2006

£ Million

Source: (Keynote, 2007)

Total market size of online grocery retail market was about 1800 million pounds in
2006. Tesco.com has been the leader so far Datamonitor (2008a).

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2.5 SCP Model

Online Grocery Retail

Market

CONDUCT
STRUCTURE
Firms rather match their PERFORMANCE
Oligopolistic prices than lower them Moderate margins
Competition
price leadership concept Huge profits due to
5 top players with
Some differentiation of huge sales
90.5% of market
share (Key Note, groceries by own labels Huge employment
2007) etc. creation

Nearly homogeneous Seeming collusion among Economies of scale &

but somewhat firms to keep new scope exist
differentiated entrants away from
market – inquiries by Rapid growth of
products
Competitions commission market
Huge barriers of
Clear dominance of the New Organic foods on
entry, large
market by top 5 players anvil
economies of
scale, huge capital Huge costs of entry/exit Promotion of
costs, bulk buying environment
power Dominance over suppliers friendly green
and buyers bags

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2.6 Porter’s Five Forces Model

Threat of New
Entrants (Very
Limited)

Power of Suppliers Competition

Power of Buyers
(weak) among Existing
(negligible)
Firms (Very High)

Threat of
Substitutes (Low)

Competition among existing players

 Market Concentration: 5 big players with majority market share viz. Tesco.com,
Ocado, Sainsbury’s, Waitrose, and ASDA have Intense competition amongst them.
One company intends to grow by capturing other’s market share, nearly 90% of
market share owned by big 5 companies. (Datamonitor, 2008a).

 Rate of Growth of Market: High growth so far, new entrants like Ocado have come
up, and existing companies have increased the coverage area of their delivery
services. Companies grow at the expense of each other (Mintel, 2008).

 Cost conditions: Huge economies of scale enjoyed by existing players, thus there is
cut-throat competition among competitors to capture market share only at the
expense of other. High storage cost of grocery and it’s highly perishable nature leads
to intense competition among companies to sell their products and generate cash.
At times companies sell products at loss to cut competition in a particular product
segment (Mintel, 2008).

 Product Differentiation: limited differentiation possibility of grocery products leads

to intense rivalry among companies.

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 Exit barriers: relatively high costs of exiting the market as the distribution model and
technology used for online retailing is customised and every other online retailer has
different distribution model and technology. Integration of technology is a challenge
in itself and carries huge costs, and thus impels companies to compete and stay in
the market (Key Note, 2007).

Threat of New Entrants

 Existing economies of scale and huge start-up capital/fixed costs requirement deter
new entrants in the market (Datamonitor, 2008b).

 Access to distribution channels is crucial and attracts huge investment in

technology, logistics, and warehouse networks to cover huge geographical areas. A
new entrant will take a lot of time to come up with reasonable geographical
coverage of market to compete with existing players (Datamonitor, 2008b).

 Groceries are nearly homogeneous but somewhat differentiated, and there are only
5 big companies dominating the market, that have differentiated and branded their
groceries creatively (premium, value, own brands etc.) to carve a market share for
themselves in the highly brand conscious market (Key Note, 2007).

 Technology gives the competitive advantage to existing players, for example the
RFID systems for stock picking & replenishment. Implementing technology takes a lot
of time and new entrants are likely to lag behind (Key Note, 2007).

 These factors lead to huge barriers of entry. However, companies who do not have
online grocery retail platforms like Morrisons, Somerfield, LIDL, ALDI, are watching
the market and planning to invest in technology and distribution systems to tap the
online grocery retail market (Rowley, J., 1998).

Power of Buyers

 Consumers are price sensitive and they check for lowest prices online. This
intensifies the rivalry among companies to charge lowest prices (TNS World Panel,
2009).

 There are widely fragmented consumers of grocery across UK (Datamonitor,

2008b).

 There are only 5 major companies selling groceries online with control of about 90%
market share leaving less room for choice for buyers (Key Note, 2007).

 Daily use non-differentiated grocery items, leaves customers with less choice of
substitutes.

 There is no switching cost involved other than loosing on the loyalty card benefits
that arise from repeat purchases.

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 All this means that consumers have only very limited power to affect a company’s
business as all the companies keep matching prices with one another and some offer
loyalty benefits to existing customers like Tesco.com club-card.

Power of Suppliers

 Supplier power is considered to be low as there are many fragmented suppliers of

nearly homogeneous grocery products (Datamonitor, 2008b).

 There is no threat from a supplier to integrate forward due to huge capital

requirements and economies of scale existing in the grocery market combined with
thin margins (Key Note, 2007).

 The companies are huge brands compared to many suppliers, though there are
many big brand companies like Parle & Coca Cola whose products are sold by
Tesco.com. These are huge brands and in such a case both the supplier and retailer
enter into mutually beneficial contracts of business so that no one suffers due to
competition in market.

 The huge size of companies and huge number of supplier means companies enjoy
power and often squeeze the supplier’s margins by contracting and/or bulk buying
(Key Note, 2007).

 There are low switching costs and retailing companies have introduced own brand
labels for products comparable to those of big brands like coca cola and Parle under
their own brand labels.

 If retailers collude and do not sell a particular supplier’s product for eg. Coca-Cola
then it’ll be difficult for Coca-Cola to find alternative for that loss of sales and
integrate forward as well; also, competitors of supplier will capture that market
share quickly by contracting with the retailer as the retailer is in possession of
physical retail store in high street where millions of consumers shop everyday.

Threat of Substitutes

 Groceries are nearly homogeneous but somewhat differentiated and substitutes

are very likely with some differentiation by companies like own brand labels,
different size and packaging, and ingredients etc (Mintel, 2008).

 Every company responds back to the differentiation attempts of another and sells a
similar grocery product, for example, the recently successful, value for money “own
brand labels”.

 Companies know there is no real switching cost involved for customers other than
loosing the loyalty benefits and thus always match products and prices with each
other (TNS Super Panel, 2009).

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 All this makes it very difficult for consumers to decide if buying the same grocery
from another retailer will benefit them or not especially when there are loyalty
points to be gained whilst repeating purchases from the same retailer. In fact
companies are growing at the expense of one another.

3. Tesco.com

The UK’s (and worlds) largest online grocery business was started in 1996, and
launched its website i.e. www.Tesco.com in 2000. Tesco.com’s annual online sales
exceed 2.5bn (Datamonitor, 2008b), which is almost more than half the online
grocery market size in UK. It has more than a million active customers and more
than 250,000 orders completed every week (Key Note, 2007).

Tesco.com controls over 60% of UK online grocery market, and makes profits of
more than 100 million. In UK, 6 in every 10 pounds spent by consumers on online
grocery shopping is at Tesco.com (Mintel, 2008).

3.1 Strategic Positioning

1. Tesco.com used a store-picking distribution model for supplies of it’s groceries

unlike rivals who invested money in warehouse model (Hackney, R. and Grant,
K. and Birtwistle, G., 2006). Tesco.com set up the technology to handle the
online orders at the local Tesco.com retail store. As a process, Online orders
from the website are relegated to a nearby Tesco store, wherein an employee
carrying a gadget in hand processes the order and picks up the items ordered
and then packs them to make them ready for delivery from that store itself
(Mintel, 2008). This industry re-defining model has proved to be very cost
effective for Tesco.com as the margins in retail business are very low and price
competition is high. With the efficiencies offered by this model, Tesco.com has
been able to cover 98% of UK postcodes (Key Note, 2007).

2. Tesco.com has also opened its first dot-com-only store situated in Croydon; it
enables the company to meet the demand for its home-shopping service that the
local stores are unable to meet. This store is not open for sale to general public
but only handles the online orders (Mintel, 2008).

3. Apart from this Tesco.com has effectively used the loyalty (Rafiq, M., and
Fulford, H., 2005) club-card to retain the huge customer base despite not being
the cheapest retailer in the market. Online grocery retailing is a loyalty business,
build it and maintain trust with customers (Tanskanen, K. Yrjola, H., and
Holmstrom, J., 2002 ).

4. Delivery Systems
Tesco.com has about 1900 delivery vehicles, 300 stores and 9,000 pickers for
online grocery shopping business, and has a separate subsidiary company that

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owns and operates its distribution systems. Such a division leads to efficiency of
operations, cost savings, and financial performance improvement for Tesco.com
as a group of companies (Key Note, 2007).

3.2 Competitive Advantage

Technology Advantage - Forerunner in Embracing Technology

Tesco.com’s investment in technology & use of RFID technology for stock-picking

and shelf replenishment helped it enjoy the competitive technology advantage. For
any other company it will take about 18 months time to implement such technology
to enter the market (Mintel, 2008).

Only Ocado is still using the warehouse model. Tesco.com has taken the lead in
online grocery retailing market primarily due to technology advantage it had and the
unique non-warehouse business model of distribution (Datamonitor, 2008b).

Low Cost Business Model

Tesco.com is a bulk buyer and has been able to keep its prices lower than most
rivals. Use of better technology and least investment in warehouses also enabled
Tesco.com to keep its costs lower compared to rivals (TNS Super Panel, 2009).

Distribution Model

Tesco.com has got distribution coverage of almost 98% of UK postcodes

(Datamonitor, 2008b), and it delivers from local retail stores, which in-turn leads to
lesser delivery time and lower cost of distribution. Technology plays a key role in this
distribution process (Datamonitor, 2008b).

Club-card

Tesco.com launched it’s club-card in 1995, since then it has grown to become the
largest loyalty card in the UK with about 14 million club-card holders (Datamonitor,
2008b). It has been successful to some extent in retaining the customer base of
Tesco.com. Despite not being the lowest cost grocer, Tesco.com has been successful
in utilizing its club-card to retain customer and maintain lead over rivals
(Datamonitor, 2008b).

4. Recommendations

The unprecedented rise in Grocery Inflation this year (ONS, 2009) has made an
impact on shopper behaviour. As a result the prices of almost all groceries have gone
up considerably between 2007 and 2008 (TNS Super Panel, 2009). Over time grocery
retailers will not be able to charge a premium on top of the already inflated grocery

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prices, and consumers will be less willing to pay more. Already, consumers have
shifted more towards discount retailers and low-priced groceries (Mintel, 2008).

Due to recession there will possibly be radical changes in the consumer behaviour
(ref. Appendix 3), and thus, characterizing a different mindset, mood and psychology
of consumers (Ramus, K., and Asger Nielsen, N., 2005). This will be in stark contrast
to the characteristics of consumers in boom time. All this suggests that the market
will not see the kind of growth it has been through, and Tesco.com should prepare
proactively to fight the possible meltdown of the market and achieve growth in the
recession times (TNS World Panel, 2009).

Tesco.com is concerned over their vulnerability to the property market downturn

and has decided to delay and scale back their new store development program (Clift,
2009).

In the short-run in 2009, online grocery retail market may see a sudden rise in
demand, especially for low priced groceries, primarily due to increasing number of
unemployed customers and increasing grocery prices & inflation (ONS, 2009).
Afterwards, the market may begin to stabilize; also, low cost rival ASDA is set to
encroach on the market share of Tesco.com (Key Note, 2007). Ocado is another
player that have snatched a considerable share of market, though it sells niche
products from Waitrose stable (Key Note, 2007).

Some Recommendations for Tesco.com.com –

Sell more low-cost-value for money products, expand the variety of grocery
within low-cost category available online, and put marketing efforts for low-
cost products, invest more in developing own-brand-Labels

Offer loyalty discounts to customers to further increase customer base, and

promote club-card benefits aggressively as consumers look for extra benefits
with grocery shopping

Tesco.com should not invest huge cash in buying land for warehouses or
other logistics as the property market is in downturn

Tesco.com should streamline its store-picking and distribution model with

the help of technology, which has been its key competitive advantage so far.

Tesco.com should now think of becoming the lowest priced retailer in the
market and compete with ASDA on price. Cost-cutting measures will help
Tesco.com.com to increate profit margin.

Tesco.com should source more of its products from local producers and
farmers in order to reduce costs associated with currency exchange linked
with imported groceries.

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Tesco.com should invest in alternative energy sources link wind & solar
energy to power its technology data warehouses and save on significant
costs.

5. Conclusion

Tesco.com has been a very successful leader in the market so far, and its strategy
including dotcom only stores, RFID technology, and loyalty card has been a huge
success so far. Tesco.com has been able to capture a lion’s share of the market
mainly due to its strategic positioning (Mintel, 2008). However, every successful
company has to maintain the lead and invest strategically to keep the momentum
going. Tesco.com should be cautious of recession, and make efforts to retain and
grow its market share and revenues.

6. References

Clift, P. (2009), “Estates Gazette” [online], issue. 912, p.18, available at:
http://0-web.ebscohost.com.emu.londonmet.ac.uk/ehost/detail?vid=1&hid=16&sid=07b2372a-e0e3-4254-
8c26-fbba70ca705d%40sessionmgr2&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=buh&AN=37601035

Datamonitor (2008a), “Food Retail in the United Kingdom” [online], in Datamonitor, July
2008 Industry Profile, available at:
http://0-web.ebscohost.com.emu.londonmet.ac.uk/ehost/pdf?vid=1&hid=5&sid=ba0cbf8e-dcc0-4472-9c34-
327cf0aec172%40sessionmgr8

Datamonitor (2008b), “Online Retail in the United Kingdom” [online], in Datamonitor, June
2008 Industry Profile, available at:
http://0-web.ebscohost.com.emu.londonmet.ac.uk/ehost/pdf?vid=1&hid=3&sid=ed1720a7-2f3d-4789-a90c-
b15f7e7ded62%40sessionmgr2

Datamonitor (2009), “Tesco Plc” [online], in Datamonitor, 22 Jan 2009 Company Profile,
available at:
http://0-web.ebscohost.com.emu.londonmet.ac.uk/ehost/pdf?vid=1&hid=13&sid=3f949bd6-7650-46f0-9a90-
618dec77a081%40SRCSM1

Hackney, R., Grant, K. and Birtwistle, G. (2006), “The UK grocery business: towards a
sustainable model for virtual markets”, International Journal of Retail & Distribution
Management, Vol. 34 No. 4/5, pp. 354-368

Key Note (2007), “E-Commerce: The Internet Grocery Market” [online], in Griffiths, J. (Ed.),
2007 Market Report, 5th ed., available at: http://www.keynote.co.uk/kn2k1/CnIsapi.dll?
nuni=67312&usr=10948srv=01&alias=kn2k1&uni=1240925069&fld=J&Jump=ViewPDF

Mintel (2008), “Food Retailing – UK – November 2008” [online], available at: http://0-
academic.mintel.com.emu.londonmet.ac.uk/sinatra/oxygen_academic/display/id=280627/display/id=426896?
select_section=280627

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Economic & Global Context - MNP058N - MBA Mukesh Kumar

Mintel (2009), “Home Shopping – UK –March 2009” [online], available at: http://0-
academic.mintel.com.emu.londonmet.ac.uk/sinatra/oxygen_academic/search_results/show&/display/
id=395647

ONS (2009), “UK Statistics Snapshot” [online], available at:

http://www.statistics.gov.uk/instantfigures.asp

Porter, Michael E. (1998), “Competitive Advantage: creating and sustaining superior

performance”, New York; London: Free Press

Porter, Michael E. (2004), “Competitive Strategy: techniques for analysing industries and
competitors”, New York; London: Free Press

Rafiq, M., and Fulford, H. (2005), “Loyalty Transfer from Offline to Online Stores in the UK
Grocery Industry”, International Journal of Retail & Distribution Management Vol. 33 No. 6,
pp. 444-460

Ramus, K., and Asger Nielsen, N. (2005), “Online Grocery Retailing: What do Consumers
Think”, Internet Research Vol. 15 No. 3, pp. 335-352

Rowley, J. (1998), “Internet Food Retailing: the UK in Context”, British Food Journal, Vol.
100/2, pp. 85–95

Tanskanen, K. Yrjola, H., and Holmstrom, J. (2002),“The way to profitable internet grocery
retailing – six lessons learned”, International Journal of Retail & Distribution Management,
Vol. 30 No. 4, pp. 169-178

TNS Super Panel (2009), “Market Watch Report” [online], available at:
https://www.tnsinfo.com/TNSInfo/Doc/0/FERAEDLQPOQ4P3HFNAVNPG7K8F/P2009%2004%20New
%20Market%20Watch%20Report.XLSS

TNS World Panel (2009), “Consumption in a Recession” [online], in Pandirla, S. (Ed.), 2009
World Panel Hot Topic, available at:
https://www.tnsinfo.com/TNSInfo/Doc/0/IL3CA3RLDFKKP7PKGI0L1KID30/14175_Hot_topics_nov08.html

7. Bibliography

Delaney-Klinger, K., Boyer, K.K. and Frohlich, M. (2003), “The return of on-line grocery
shopping: a comparative analysis of Webvan and Tesco’s operational methods”, The
TQM Magazine, Vol. 15 No. 3, pp. 187-96.

Tesco (2008), “Annual Review and Summary Financial Statement 2008” [online], available
at: http://www.Tesco.comreports/areview08/downloads/Tesco_annual_review_08.pdf

http://www.Tescocorporate.com
8. Appendix

1. Market Share

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Market share (%) of companies in online grocery retail sector in UK, years ending December 2002-2006

Source: (Key Note, 2007)

Tesco.com’s market share has been declining since 2002 when Ocado started its
business, however, the revenues generated by Tesco.com have been ever increasing and
it remains the market leader, but with a lowered market share year-on-year (Key Note,
2007).

2. SWOT Analyses of Tesco.com

Strengths Weaknesses

 Market leading presence  High dependence on the UK

 Strong performance of market
Tesco.com.com  Weak inventory turnover
 Strong brand name  Not lowest cost seller
 Technology  High investment in property
 Distribution Model
 Strong cash flows and profits

Opportunities Threats

 Growing online shopping in the  Increased cost of labour

UK  Rising food prices in the UK
 Growing Broadband usage  Intense competition
 Opportunities in low cost own  Recession
label markets  Inflation
 Declining GDP
 Rising unemployment among
consumers

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3. Online Consumer Spending in UK

Household expenditure fell 1.0 per cent and is now 0.8 per cent lower than the
fourth quarter of 2007. Consumer expenditure is falling due to unemployment and
recession combined with high grocery prices.

4. Broadband Usage Table

Number of Broadband Internet connections in the UK (million), years ending

December 2002-2006
2002 2003 2004 2005 2006
Broadband connections
(million) 1.36 3.11 6.12 9.89 13.00

% Change year-on-year
- 128.7 96.8 61.6 31.4

Note: includes residential and small and medium-sized enterprise (SME) connections.
Source: Key Note 2007 Report on - E-commerce: Internet Grocery Market

The ever-increasing number of broadband users in UK has benefitted the expansion of

online grocery retail market.

5. Growth Story

In 1994, online grocery retailing was in nascent stage, by 2000 there were scores of
online retailers selling all possible products under the sun. There was huge hype and
fanfare associated with online retailing, with the tampering down of dotcom market
this hype and fanfare had sobered down, as a result only a few serious players
remained to dominate the market. The market began its journey in mid 90s and is
most likely in the maturity phase currently. This may indicate that the online grocery
market may squeeze in near future due to current economic downturn and political
reasons before it starts to rise again.

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Figure 1: Online Grocery Retail Market Lifecycle (Self analysis)

Given the current economic downturn and challenges faced by online payment systems due
to increasing number of online frauds, the market may see a swift decline in online grocery
retailing as consumer’s preferences may shift back to conventional local area retail shops.
This may also be affected by the financial weaknesses faced by large online retailers due to
credit crunch, and the incentives given to small retail shops by the government. More
importantly, consumers in UK have a propensity to prefer locally produced grocery in local
retail shops than the imported and cheap groceries of big online retailers.

6. Financial Performance

Source: Datamonitor 2008 Industry Profile: Online Retail in UK

As evident from Tesco’s overall performance, its revenue has increased marginally,
whereas profits have steeply declined. Fall in profits is primarily due to fall in the
prices of groceries due to inflation pressure and increasing price competition in the
market. Every other retailer is offering discounts o customers in the current
recessionary times. Tesco.com cannot afford to loose customers by not giving them
discounts and matching competitor’s prices Datamonitor (2008b).

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