- Published: December 2011
- Region: Great Britain, United Kingdom
Supermarket Services 2013
- Published: August 2013
- Region: United Kingdom
- Key Note Publications Ltd
Over the past couple of decades, UK supermarkets have been expanding and diversifying their activities, with many now offering a wide range of services such as financial products, utilities, restaurants and catering facilities, telecommunications and Internet services, health products and pharmacies, and a number of other miscellaneous services, such as digital entertainment portals, dry cleaning and automotive services.
The deregulation of a number of products and services — such as pharmacies, the UK energy market and, more recently, legal services — has encouraged supermarket expansion across a range of new market sectors; as has the large-scale operations and market presence that such retailers have, with the increased footfall achieved by supermarket operators driving interest in new products and services. As a result, many of the larger supermarket chains have become one-stop shops for consumers by providing a range of services catering to various requirements and needs.
According to this report, total revenues generated by the leading UK supermarket chains within the services sector grew by 7.5% in 2012, with a recent push by many of the major multiple retailers to expand within the financial services sector driving much of this growth. For example, both Tesco and Marks & Spencer (M&S) embarked on significant expansion plans for their respective banking businesses, with Tesco launching mortgage products for the first time during August 2012; and M&S announcing plans to introduce a chain of 50 in-store banking branches in some of its larger shops across the UK over the next 2 years. More recently, Sainsbury's announced in May 2013 that it had taken full control of its financial business, Sainsbury's Bank, after revealing that it had acquired the remaining 50% share of the business from original partners Lloyds Banking Group. These moves reflect a growing assault on traditional high-street banking groups being waged by the supermarkets, which has been aided by the ongoing economic recovery, as well as rising consumer demand for alternatives to traditional retail banks, with the financial sector being hit by a string of scandals in recent years such as the Libor debacle, payment protection insurance (PPI) scandals and IT system failures.
Other service sectors, such as health and pharmacy, have also observed significant growth in recent years, with several of the leading supermarket retailers now operating a range of in-store facilities. Sainsbury's, for example, which now runs a chain of 270 in-store pharmacies, has recently developed a new General Practitioner (GP) surgery programme, which began in 2011/2012, with the retailer now hosting around 35 in-store Narional Health Service (NHS) GP or nurse-led practices, as well as 12 dental surgeries; while The Co-operative Group manages the third-largest chain of pharmacies in the UK, comprising around 781 outlets.
More recent market trends have seen supermarkets expand into areas such as digital entertainment, with both Sainsbury's and Tesco launching new on-demand video streaming services online. Supermarkets may now also offer legal services, following changes to the law made in 2012 which have allowed new business structures, such as supermarkets and high-street retailers to launch their own legal service operations. So far, however, the Co-operative Group has been the only major supermarket chain to introduce its own legal services business — Co-operative Legal Services (CLS) — which it plans to offer alongside its financial services business which comprises a 342-strong chain of banking branches in the UK.
Despite the growing popularity of online grocery shopping and convenience formats in recent years, the future is likely to see a renewed emphasis on the development of larger supermarket outlets as ‘retail destinations', which offer a range of in-store services such as banking branches, restaurants and grocery shopping. These new store concepts are currently being trialled by a number of operators, including Tesco and Waitrose, and have been designed to encourage shoppers to spend more time in-store. Tesco, for example, recently acquired restaurant chain Giraffe, following further tie-ins with coffee chain Harris + Hoole and bakery business Euphorium. Waitrose announced the rollout of new in-store concierge-style desks in around 100 outlets, which will provide a range of services, such as online shopping portals, dry-cleaning, flower delivery and gift wrapping, as well the development of new in-store ‘family-themed' restaurants. The trend towards supermarkets as ‘retail destinations' mimics concepts already utilised by retailers in Europe and Asia, where grocery retailers often form part of larger shopping malls; and is likely to become widespread across the UK, if successful.
The next few years are likely to be tarred somewhat by slower-than-expected economic recovery in the UK, which will serve to dampen consumer spending somewhat. However, the ability of supermarkets to undercut traditional high-street retailers in terms of price may help to attract consumers seeking cheaper alternatives. Current growth areas, such as financial services, digital entertainment, legal services, and restaurants and catering should also help to drive sales within the supermarket services sector over the following years. These areas will also encourage new concept stores and the development of larger supermarket outlets as ‘retail destinations'. As such, the authors estimate the sales of supermarket services to increase by 39.9% between 2013 and 2017, with a compound annual growth rate (CAGR) of approximately 8.5% forecast for the next 5 years. SHOW LESS READ MORE >
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