BUYER BEHAVIOR MKT 621 / SECTION 1 INSTRUCTOR: DR. MAHMUD A.

SHAREEF (MDS)
RETAILING IN BRITAIN: TRADITIONAL RETAILERS VS. DISCOUNTERS
CASE STUDY ANALYSIS (I)

Group # 4 NAME 1 FARHANA SHARMIN 2 MD. MANZURUL HASSAN SAHIR 3 MD. SYEDUR RAHMAN 4 TANJEELA RAHMAN ID NUMBER 102 0575 460 111 0699 060 103 0841 460 111 1193 060

Date of Submission: 5th March 2012

1 | Page

Q1. "By the 1990s, apart from the specialist foreign retailers, traditional British retailers had to encounter the domestic supermarkets." What significant shift in strategy did the supermarkets produce, and how did it influence consumer behavior? Why did consumers favor the supermarkets? The traditional British retailers have dominated the retailing industry of UK for a long time. However, they started facing intense competition from newly emerging domestic supermarkets. These supermarkets moved into non-food offerings. The huge volumes and relatively lower range of supermarkets enabled them to undercut the price being offered by general retailers. Other strategies included: a) Lower average prices A basket of do-it-yourself (DIY) goods at a supermarket cost 46% lower than the average prices while at a purely DIY store it was 58% higher than average. b) Efficient inventory management The supermarkets kept prices down through efficient inventory management techniques like Just-in-time concept. c) Superior customer service The supermarkets guaranteed their success by ensuring superior customer service by installing modern information technology systems to enable their backrooms to know and respond quickly to the needs of the customers at the front-end, which decreased working capital requirements. The foray of supermarkets into the general retailing goods had intensified the competition. The supermarkets diversified from groceries into selling their own branded general household goods like shampoos, toothpastes, newspapers, magazines, books, and everything from DVD players to denim jeans. Supermarkets foray into general merchandizing transformed the British shopping habits. Supermarkets, apart from expanding themselves, made sure that their customer service was superior. They installed modern technologies to enable their backrooms to know and respond quickly to the needs of customers at the front end. Another important outcome of the timely information sharing was lowering of average inventory, which in turn decreased working capital requirements leading to lower costs. This strategy, in turn, influenced consumer behavior significantly. The steady flow of customers was a built in advantage for the supermarkets. This advantage was exploited to lure the grocery shoppers to buy household articles by offering them at low costs. The consumers favored the supermarkets because the stationary was cheaper in

2 | Page

supermarkets. In addition, these supermarkets provided the consumers with greater convenience by offering stationary and grocery items at the same place. Q2. What was the threat imminent to the survival of traditional retailers? What, according to most analysts, could be the way out for the traditional retailers? The traditional retailers were faced with competition from the supermarkets. However, besides the competition from the discounters, traditional retailers were presented with another threat imminent to their survival. They were hit hard in their staple apparel business in which prices started falling continually. As most of the apparel production moved to lowcost countries, there was not much to be saved out of the supply chain. Besides, because of the inherent lower costs, the discounters were undercutting the departmental stores by offering chic clothes at low prices. According to experts, the trend towards casual business wear had a huge impact on the sales of formal clothing which had been a staple apparel line for traditional department store. One more factor that affected the traditional retailers was a sharp decline in overall spending of the customers. Since the major portion of consumers who drove the markets traditionally had grown older, the spending got diversified into a variety of services. This reduced the household budget for general merchandising. As a result, the customers moved toward discounters. Increasing competition unearthed the weakness in traditional retail management. Many chains over-expanded, but as some of the countrys biggest employers, they could not close shops and fire people, due to the fear of public backlash. As a result, profit margins dipped. Decreasing profits, which in turn reduced the share prices, made many British retailers vulnerable to takeovers. The analysts predict that a lot of British retailers would fall prey to mergers and acquisitions. According to the analysts, the way out for the traditional retailers could be cost cutting through mergers and acquisitions. Through this the retailers could keep their profits growing. Amidst speculations regarding a way out, British analysts also suggested that such retailers who were able to control operating costs would be in the best position to survive. Indeed, it did seem that being able to trade in volumes and leverage on economies of scale was the key to success in a highly competitive retail industry. Organizationally, it was necessary to put the right people in the right place so that competitive marketing strategies could be implemented. A further step that could be taken by the British retailers was to expand globally. This could help them relocate additional employees without terminating their services, besides being able to leverage on global supply chains and the global fashion perspective.

3 | Page