THE POSSIBLE IMPACT OF LIDL DISCOUNTED SUPERMARKET IN BARKING ON TESCO SUPERSTORE, BECKTON BRANCH

Discounted Supermarket Purchase Effect 23

THEPOSSIBLE IMPACT OF LIDL DISCOUNTED SUPERMARKET IN BARKING ON TESCOSUPERSTORE, BECKTON BRANCH

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ACKNOWLEDGEMENT

Conductinga research work on the retail market was not devoid of challenges.The ability to acquire information without disruption of the twoorganizations’ daily operations is a factor that created achallenge to the study. However, I would like to appreciate thecooperation accorded to me during this process by the managerialteams of both Lidl and Tesco supermarkets in Barking and Becktonrespectively. Without their cooperation, collection of data at theirpremises and real-time sampling of their pricelist would not bepossible. Further, I would like to appreciate all the respondents whotook time off their schedules to fill in the questionnaires that alsoprovide analytic data for the research. I would also like to thank mysupervisor/ instructor for the guidance accorded to me during theresearch process. Finally, I would like to thank my family, friendsand colleagues who offered me with the audience to pitch mypresentation concerning the research topic and validated itsviability.

ABSTRACT

Thepresence of Lidl at Barking on Tesco at Beckton is an essentialexample of the competition between the traditional supermarket chainsand the discount supermarkets. The effects of a growing discountretail industry that also offer cheap prices show the negative impactof Lidl on Tesco. The need for Tesco to mitigate the factors ofdiscounters on the giant retailers` sales and profit margins is madeurgent by the steady exodus of shoppers to the discount chains. Most discount stores are set up with the strategy of providing cheapprices with good quality.The research paper uses both thequalitative and quantitative explorative types of data collection andanalysis. The paper clearly outlines the effects to Lidl on Tesco.

Keywords:Effect,Misconceptions, Competitive Advantage, Shoppers, The Retail Industry.

TABLEOF CONTENTS

ChapterOne

  1. Introduction 6

    1. Research questions 7

    2. Problem statement 8

ChapterTwo

  1. Literature Review

    1. The effect of Lidl discount stores’ presence on Tesco 10

    2. Private label strategy 10

    3. Factors fuelling growth of Lidl at the expense of Tesco 13

      1. Misconception by mainstream stores 13

      2. Misconception 2: discount stores target poor or low class in society 14

      3. Misconception 3: Discount stores offer poor quality 15

      4. Misconception 4: Hard discounting is the recession 15

      5. Smaller premise numerous location strategy 16

      6. Consumer shopping habits and discounts 16

        1. Factors affecting consumer behavior

Culturalbehavior 18

    1. Strategy by Tesco 19

    2. Effect of presence of Lidl in Barking on Tesco at Beckton 22

      1. Loss of jobs reduction of staff numbers 23

      2. Effect on various departments 23

ChapterThree

  1. Methodology 25

    1. Research design 26

    2. Data collection 27

ChapterFour

  1. Results/ Findings 29

ChapterFive

  1. Discussion 32

    1. Lidl discount supermarket against Tesco 35

    2. Brand affinity and private labeling strategy 35

ChapterFive

  1. Conclusion 37

ReferenceList

Appendices

CHAPTERONE

Dynamicsin the regional and global economies have led to the recessionperiod a period that has seen a change in the various markets aroundthe globe. The change can be expressed in negative terms since thedebt per capita ratio of most regions has increased. Hence, theindustries such as property and manufacturing, have suffered.McNicholet al. 2011 opines, as a consequence to the occurrence of an economicrecession, governments have introduced austerity measures such asbudget cuts. Increased taxes in the yearly financial budgets havebeen observed on commodities, essentials and consumer goods.Therefore, the cost of conducting business has gone up, and thecitizens bear the brunt.

Glick,Reuven and Lansing, 2011 note that due to the increased rates ofunemployment, the percentage of disposable income per household andindividual has immensely decreased. Statistics presently show thatapproximately eight out of ten shoppers that accounts for 78.21 % ofthe total number shoppers opine that prices on essential commoditiessuch as foodstuffs have increased. 45% of the shoppers are worried bythe expensive prices of essentials such as foodstuff. The shoppersalso makeup the bulk of the supermarkets shoppers who spend aconsiderable amount of their income at the markets

Therefore,the availability of discounted supermarkets has attracted theshoppers due to availability of bargains that aid in saving andreducing costs. Times 2008 notes the trend has been observed all overthe European continent. The effect has also had a threat on thetraditional United Kingdom market dominated by Tesco and Sainsbury.Wrigley 2010 opines the growth and exodus of shoppers from the mainsupermarket to discount supermarkets has resulted in losses for themain chains. The above development means that shoppers are nowspending most of their income at the bargain stores than the mainsupermarket chains. The effect of this trend is such that largesupermarkets such as Tesco or Sainsbury are bearing the brunt oflosing shoppers to bargain supermarkets such as ALDI and Lidl.February 2014. However, the main supermarkets stores have createdstrategies to maintain a steady stream of shoppers through discountsand price slashes to increase sales. However, the strategy is a lastattempt to salvage the supermarket from losing its shoppers since thediscount supermarkets offers goods at cheaper prices as compared tothe main stores Jana. The research paper will solely focus on theeffect of decreased consumer spending ability in relation theavailability of discounted stores such as Lidl in Barking. The effectof how such a store`s presence affects the major supermarket store,Tesco in Beckton will be addressed.

Thisstudy will focus on the following research questions and find out thecorrelations between the questions and answers.

1.1 ResearchQuestions

Thefollowing research question will aid in the research of the effectsof the presence of discount stores such as Aldi and Lidl to the salesand success of main supermarkets chains such as Tesco.

1)Has the rise in discounted supermarket affected the profitability ofTesco, Branch in Beckton?2) What is the motivation forconsumers changing their shopping habit i.e. do people rate pricemore than quality?3) How can Tesco mitigate this threat posedby discounted supermarket?4) Will a rise in discounted threatenthe existence of Tesco Branch in Beckton, i.e. will it lead to areduction in staff? Will it result in the closure of the supermarketstore? Will it result in the shift of the supermarket to a smallerpremise?

1.2 ProblemStatement

Theglobal financial meltdown has reduced the amount of disposable incomefor the majority of individuals. The individuals from the middle tolow working class and unemployed people opt are affected bygovernments austerity measures, and increased taxes levied oncommodities. As a result, shopping in supermarkets without thepossibility of a bargain has created a need for the provision ofdiscounted and bargain shopping outlets in all economies. A perfectexample is the incursion of German found discount grocers, Aldi andLidl, who have invaded the United Kingdom market dominated by Tescoand Sainsbury. However, it is fundamental to note that discountstores offer a bargain to shoppers that in turn save their income oracquire more goods as compared to shopping at the major supermarkets.The current clique of shoppers is increasingly veering towardsdiscount shopping a phenomenon of quantity over quality for goods.However, this research paper does not opine that discount shoppingoutlets stock sub-standard goods. Van Heerde 2008 notes that a packof diapers at Tesco costs approximately £12.10 while a similar packof diapers from Aldi and Lidl costs approximately £7.02. That ishalf the price Tesco offers its shoppers. The shoppers are thenattracted towards these bargains. Therefore, the mainstreamsupermarket chains are bearing the loss of shoppers and dip in profitmargins as they focus on maintain a hold on the markets theytraditionally held.

Shoppersare increasingly learning to appreciate the availability of bargainstores within their localities, a development that is disastrous tothe main supermarket stores. It is evident that Tesco’s profitmargins have fallen. What measures can Tesco implement to preventfurther loss of profit and market to the Lidl discount stores? Theattractive elements of discounted shopping have an effect on thegeneral shopping behavior what attracts shoppers to go for bargainsregardless of brand manufacturing? Therefore, the effect of a rise indiscounted stores will ultimately affect the Tesco stores. It isconclusive to note that the problem statement present the effects ofthe presence of Lidl discounted supermarket in Barking on the TescoSuperstore in Beckton.

Insummary, the introduction focuses on the research questions and theproblem statement. The research question will guide the flow of thestudy while the problem statement presents the gravity of the problemand why the study is necessary.

CHAPTERTWO

LITERATUREREVIEW

2.1 Theeffect of Lidl discount Stores presence on Tesco

Accordingto Cummins 2008, the rise in discount shopping behavior has led tothe growth of grocery chains. The chains have capitalized on brandinga majority of their stock. The effect is availability of fair pricedcommodities in the market as compared to manufacturers’ brandedgoods that are more costly. Discount supermarkets differ immenselyfrom main supermarket chains such as Tesco. However, there arevarious forms of discount stores that range from the low estheticappealing store stocked with basics to the middle line discount/bargain store. The stock keeping units of discounted stores are alsolow as compared to the major supermarket chains. The size ofpremises also differs greatly with discount stores operating insmaller premises as compared to the larger premises occupied by superstores.

Forinstance, Lidl’s costs compound an overall increment of 12.56% to13.95% to their procurement prices. The approximate 12% to 14%additional margin includes an approximate 2.1% price for rent,overhead and miscellaneous charges, the stores logistics, marketingand near 4% for the staff. Therefore, the calculations in costmargins aid in creating an efficient accounting and cost reductionsystem that ultimately reduces the overall prices of goods stocked inthe discount stores. In comparison to the Beckton located Tescosuperstore, the Lidl prices are quite low a factor that attractsshoppers to its aisles at the expense of the superstore. AcrossEurope and the United states, the presence of discount stores has hadan effect on the main supermarket chains. However, Aldi and Lidl’ssuccess has not only been felt in the United Kingdom. In countriessuch as Australia, commodities stocked by Aldi have attracted theattention of shoppers who opt to shop at a discount and save most oftheir income. This is evident where a commodity such as Aldi’splastic wrap sells retails for Aus. $ 1.28 as compared to a similarplastic wrap sold by Glad stores for Aus. $ 3.23. Similarly, theGerman found Lidl discount store in Barking that also follows themechanism employed by Aldi has an immense effect on the sales of theTesco superstore in Beckton. Billinton and Winter 2009 note that theLidl store combines a low Stock keeping Unit (S.K.U) number and alsocapitalizes on stocking of customized goods. The number of brandedgoods sourced from the manufacturer is low, resulting in the in theoffer of low prices as compared to the Tesco superstore. Thediscounted stores have used strategies that enable them to cutcommodity prices by large percentages. According to Colla 2003, thestrategies include the use of private or store customization on alarge number of goods stocked by the discount stores.

2.2 ThePrivate Label Strategy

Theuse of private labels by Lidl discount store has aided in theprovision of low and fairly priced commodities as compared to theTesco superstore in Beckton. Lidl’s private labels offerapproximate price cuts of about 49.5% as compared to Tesco thatstocks close 28% of private labels. Haas, Rainer and Weaver 2010note, the number of commodities stocked by Lidl stand at 81.4% ascompared to other market values that range from 46.3% of privatelabels compared to 57.3% of branded commodities stocked by Tesco.According to Kumar, Nirmalya, and Steenkamp 2007, the effect ofhaving a higher number of private labeled stocks ensures that pricesare low as manufacturer branding costs are not entirely passed ontothe shopper. Davies, Gary and Brito 2004, note the above developmenthas seen Tesco and various brand manufacturers incur losses due tothe high pricings. The discounts stores have suddenly enjoyed successdue to various misconceptions that have allowed them to thrive andacquire a significant portion of the shopper`s segment thattraditionally shop at main stores such as Tesco. The success inpenetrating household and community markets by discount stores suchas Lidl has also led to the attachment of the Lidl brand by shoppers.The location of Lidl in Barking is no coincidence as it also attractsshoppers who would traditionally have to commute to Tesco in Becktonto shop. The growth of affinity to the Lidl brand has been aided bythe constant low price margins the discount store offers. The changein attitude of shopping in traditional super stores to the closer andmore cheaply discounted stores have also increased the sales of Lidl.The quality of commodities stocked by Lidl is the same as compared tothose stocked by Tesco.

However,Metzger 2014 opines that shoppers are attracted to Lidl due to thecheaper cost and quantity advantage that comes with its uniquelabeling strategy. The amount of revenue collected by Lidl and otherdiscount stores is relative to the losses gained by Tesco andmainstream stores that stand at an approximately a quarter trillionpounds annually. Kumar et al. 2007 also opine that the mainstreamchain of supermarkets is faced with the task of preventing loss oftheir markets to discount chains. The market analysts’ failure tonote the growth of discount stores has then upset the status quo heldby traditional stores an element that the discount stores havecapitalized upon. According to Martenson 2007, traditional marketshave largely been unable to switch fully to private labeling due tothe historical ties that manufacturers hold on their stock keepingunits.

Oliveira-Castroet al. 2005, note that the comparison between price and value of thecommodity ensures that discount stores succeed at local levels of anygiven market they establish a store. However, commodities developedby main stores and labeled privately also pose a threat to the corevalue of discount stores. The ability to sway traditional shoppersaway from Tesco becomes easy. For instance, Lidl`s shift store Aldistocks the Titan chocolate bar, pseudo-brand offered in response tothe mars bar stocked by Tesco. However, Lidl stocks the titan bar inmini packs of six as compared to a single mars bar. The price of athe titan 6 bar pack stands at 68 pence as compared to a single marschocolate bar pack retailing at £2.65. Lloyd et al 2009, note thatprice comparisons show that Lidl offers its pseudo-brand of similarquality to the mars chocolate bar at a discounted rate of 140.56%.Further, the quantity per value theme is carried by the discountstores where a shopper gets six bars instead of a single bar. Theabove strategy is repeated across various categories such a laundry,dairy, dry foodstuffs just to name a few. Therefore, consumers aregiven the option of saving money collectively from buying privatelylabeled commodities against the branded goods stocked by the mainsupermarket chains. Further, the growth of Lidl has affected theprofit margins of Tesco due to the above strategy.

2.3 Factorsfuelling growth of Lidl at the expense of Tesco

Thereare various factors that have led to the growth in success of Lidl atthe expense of Tesco. Omar et al. 2014 opine that the factors may bedeemed as misconceptions concerning the market that discount storestarget in the shopper`s segment. According to Tollens 2003, themarket has been rife with misconceptions concerning discount storesthat have enabled the discount stores to thrive and grow unchecked atthe expense of chains such as Tesco. Lidl’starget area in the United Kingdom has been assumed to be a low tomiddle-income segment. However, Herstein et al. 2007, note that thewealthy have also patronized the discount retailer due to thecompetitive prices on offer. Although the growth of the discountedretailer is dependent on the current economic conditions, thediscount retailer has acquired a considerable market portion enablingit succeeds even with the reduction in an economic crisis.

2.3.1 Misconceptionsby the mainstream stores

Misconception1: Discount stores only succeed only in some regions of thecommunity.

Thediscount stores in Europe originally started after the end of worldwar two to cater for communities in Germany who been affected by thewar. Offering bargains and discounts on commodities have ensuredgrowth of the discount stores that have used the discount regime tomaintain a steady stream of shoppers. However, the main supermarketchains have continuously ignored the existence of such stores due totheir size and presence in the community based on their penetrationthat analysts opine to be local. According to Bryson, Douglas andAtwal 2014, Aldi and Lidl’s incursion into Tesco’s strongholdthe United Kingdom has seen it grow.

Therefore,the above development has caught the Tesco management by surprise.Aldi and Lidl`s presence in the United Kingdom market are solidifiedby presence of about 500 stores. The number in comparison to Tesco`s2,795 stores is small. However, Ellis-Chadwick2006 note that the discount offers and strategic placement of theAldi and Lidl stores in the same localities as Tesco superstores hasa negative effect on the profit margins of the mainstream store. Themodesty theme carried by Aldi and Lidl is a factor that makes them atarget of ridicule by Tesco. According to Van Tulder 2009, thediscount stores target a select clique of shoppers in the market andtheir margins are not affected. The above misconception is wrong andhas led to the loss of a reasonable portion of Tesco’s marketshare. According to Fox, Tim and Vorley 2004, the growth rate of Aldiand Lidl currently stands at an impressive 26%, a figure that poses athreat to Tesco.

2.3.2 Misconception2: Discount stores target the poor or low classes in society

Accordingto Banks 2010, the notion carried by analysts at larger andmainstream stores such as Tesco that discount stores target the poorin the community has led to the loss of a portion of their market.However, the discount stores have seized the opportunity presented bythis school of thought silently to seize a considerable market sharein the retail sector. Gintis 2005 opines that the growth of thediscount stores has been may be partially affected by themisconception although growth will still be gradual.Thetraditional retailers’ executives have assumed the importance oflow-income segment to their sales and profit margins. Moore et al.2006, note that the majority of people going for discount shoppingoutlets are the upper middle class and middle class. The two classespatronize the stores enabling them to save a considerable portion oftheir income. According to Mañez 2011, the attitude developed by thewealthy shoppers is based on the ‘quantity vis-à-vis value’offered and has led to the creation of a ‘smart shopping attitude.’ Therefore growth of the discount stores has been inevitable.

2.3.3 Misconception3: discount stores offer poor quality

Thetheme carried by Aldi and Lidl`s private labeling offers, itsmoderately decorated stores, simple packaging and relatively unknownbrands have misled the mainstream stores into assuming the powerfulpresence of Aldi and Lidl in their turf. The competitors havecontinuously viewed the discount store commodities as inferior to thebrand stock in the mainstream units.

However,shoppers have opined that discount stores offer a wide variety offunctional and quality products that match up to the traditionalbrands stocked by the traditional supermarkets. For instance, thedetergent sold by Aldi has surpassed other traditional and well-knownbrands such as Unilever, Proctor &amp Gamble and Henkel chemicals.Retail market analysts conducting commodity surveys have noted that79.5% of Aldi and Lidl`s private labels were rated as good qualityproducts. The ratings pit the products in a similar category with 80%of traditional brands offered by the mainstream stores. Therefore,misconception of low-quality goods has worked against Tesco and tothe benefit of Aldi and Lidl. Another strategy ensuring themaintenance of shoppers to Aldi and Lidl is the ‘customersatisfaction refund or return product guarantee.` The strategy hascreated a level of trust and affinity towards brands stocked by thediscount supermarket.

2.3.4 Misconception4: Hard discounting is for recessions.

Themisconception that has led to the growth of discount stores at theexpense of mainstream stores is the reasoning that discount storesare only successful during the recession period. However, it isevident with the improvement of economies around the globe discountstores such as Aldi and Lidl have registered impressive growth ratesof up to 26%. However, the mainstream supermarkets maybe rightconcerning the surge of discount stores due to the recession. Themainstream stores loose a portion of the retail market share to thediscount stores due to failure of implementing strategies by themainstream chains. The recession provisioned a market for the growthof discount stores. However, the maintenance of shoppers to thediscount stores occurs due to the services, low prices and goodquality of products offered.

2.3.5 Smallerpremise, numerous locations strategy

Thepenetrative effect of Lidl stores in London alone exceeds thepresence of Tesco in the metropolis. The Lidl discount stores occupyless small premises that Tesco. Therefore, discount store chain canopen numerous stores within a locality as compared to Tescosuperstores. The acquisition or rent of small premises ensures thatthe cost related to lease of space remains relatively low as comparedto Tesco large floors. The profit projections and sales of Lidl areexpected to skyrocket over a period of five years, increasingrevenues by over 45.7%. The sales forecast estimate an increase insales by up to £64.05 billion.

2.3.6 Consumershopping habit and discounts

Consumerbehavior may be defined as the process of selecting, buying andutilization of goods and services to fulfill the needs of anindividual. Consumer behavior is affected by various factors.According to Talluri et al. 2007, the consumer identifies variouscommodities suitable for fulfilling his or her needs and chooses thecommodity that poses a greater functional ability. The individualthen extrapolates the amount of disposable income available forpurchase of the commodity. The other variables to be considered inthe consumption process are the personal, social process, thepsychological element. Consumption in the presence of a discountfacility creates a win –win situation. For instance, consumersshopping at Lidl feel the benefit of cheap and fair pricing ascompared to Tesco. The rate of preference for a particular brand isdependent on the shopper or consumer. The intensity of demand for andgood or service is also affected by the brand it carries, the priceand quality of the product. The amount of disposable income greatlyaffects the rate at which shopping occurs and how shopping culminatesinto a habit. The amount of time, interest and financial obligationmolds or causes development of consumer behavior with respect toshopping. While shopping, consumers develop preferences for variousproducts, a particular and set price range that they adhere to, andincentives. Incentives in retail may occur in form extra items. Theextra items come in the form of additional sampled products onvarious commodities. The major incentive that influences consumerspending and shapes their shopping habit is the presence of constantdiscount. Cheap price regimes aid the creation of affinity towardsshopping, ultimately leading to a habit.

Changesin lifestyle are also fundamental factors that influence consumerbehavior. The expenditure rates of people with time increases thespending rate. The Lidl discount supermarket has created a pathway inwhich shoppers grow. Moschis et al. 2004 note that spending increasesby big margins. The market offers good and quality product, coupledwith cheap prices due to availability of discount facilities. Lidlhas effectively applied the above phenomenon and raised the affinityof shoppers to its private label brands. The amount of disposableincome also shapes the consumer spending habits. Consumer behavior isalso affected the functional ability of the products they shop.

2.3.6.1. Factors affecting consumer behavior

CulturalFactors

Theculture of an area or region may influence the consumer spending orbuying behavior. Society is stratified, and different people developvarious habits depending on consumerism.

Socialstratification

Dobson2009 opines that social stratification in society that leads to thecreation class has aided business analysts’ study consumerbehavior. Social strata occurs due to presence and influence on thebuying habit of a consumer. The social factors having an influence ofthe consumer behavior is the community, family and the individual’srole.

ReferenceGroups are the benchmarks set by society or community that functionvia altruism. The referral points have a chance of influencing theoutcome in terms of consumer behavior. The consumer is at ease ofspending more of their disposable income if there is presence of adiscount facility. For instance, shopping at Lidl would over timedevelop a habit of expectance of bargain or discounts with themajority of commodities being purchased. Therefore, the effect of thepresence of Lidl in Barking on Tesco at Beckton has an effect onconsumer behavior and ultimately the consumer spending habit.

Itis conclusive to note that Lidl’s presence in Barking on the Tescosuperstore at Beckton has affected the superstore in various ways.However, the most felt effect is the continuous exodus of shoppersfrom Tesco to Lidl due various factors outlined above. Themisconceptions have also shed light on the poor and analysis of theretail market by the retail analysts who have continuously ignoredthe growth potential of the discounters.

2.4 Strategy by Tesco

Tesco’slosses due to the presence of Lidl have been immense. To tackle theloss of market share to Lidl, Tesco has been forced to use theprivate labeling that will lead in the reduction of commodity pricesin their various departments. The market portions lost to Lidl due toits cheaper price rates is a fundamental factor that Tesco has noted.According to Beck 2002, the shift from focusing on manufacturers’brand to private labeling is a strategy that Tesco has employed tomitigate the effects of loss. Tesco’s sales are approximated toreach a global sale record of about £70.84 billion. The inclusion ofdiscounted private labels in their stores has ensured a steady streamof shoppers to its doors. However, the effects of Aldi and Lidl arestill being felt regardless of the implementation of the privatelabel strategy.

Vignali2001 notes that use of the market price war against Aldi and Lidlmeans that discounted commodities from Tesco receive and attract theattention of shoppers. The marketing strategy employed by Tescoincludes a partial comparison of their discounted prices to those ofa rival and ‘unknown` competitor poking fun at Aldi and Lidl`spromotional elements. According to Andersen et al. 2007, the launchof discount labels in the superstore ensures that clients fromvarious walks of life get the quality they are looking for, coupledwith the discount. The need to reduce prices has also led to areduction or price cuts in some commodities by up to 16%. Accordingto Humby et al. 2003, preventing loss of the retail market portion todiscount stores, Tesco has been forced to develop a range of theirprivate level commodities that also pass as cheaper commodities inthe market. Tesco`s success in the retail business is under threatfrom the presence of Lidl. The introduction of discount and privatelabel brands in its departments is strategy that Tesco is using toregain control of the market from Lidl. The use of price comparisoncampaigns a reference to quality if the product offered wouldtraditionally pull shoppers back to the mainstream retailer. Theinclusion and maintenance of branded commodities would then offershoppers with a variety to choose.

However,the discounted commodities main aim would be to attract shoppers dueto competitive prices. The need to implement and follow the abovestrategy is to prevent an exodus of shoppers to Lidl and to reduceany threats in the form of competition from the discount retailsector, specifically Lidl. According to Mollah 2007, the reduction ofprices by up to 16% in Tesco’s department has created a level ofcompetition and strategy to woo back shoppers to its aisles. Discountstores currently earn revenues approximating £160 billion that hasdestroyed the sales and profit margins observed by the mainstreamsupermarket chains.

Thediscount stores growth is also projected to rise at a rate of 10% perannum. The main stores such as Tesco has created a research-basedapproach based with respect to the threats posed by presence ofstores such Lidl. Radošević and Yoruk 2000 note, addressing the keymisconceptions concerning the discount stores is a fundamental factorthat allows the Tesco to succeed if the solutions are properlyimplemented. The rate of market penetration by Tesco is an elementof regaining its market share from Lidl that has to be addressed. Thefollowing factors should be considered by Tesco if they are tomaintain an edge over Lidl. The notion of discount stores as enemiesby Tesco is natural of any competitor to competitor relationship. Theuse of Lidl chains as part of the distribution line of Tesco ishighly unlikely. However, Wiggerthale2010 notes that ruling out the possibility of a partial merger orpartnership is not possible. The occurrence of a merger would meanthat Tesco can control a large portion of the retail market ascompared a development that would prove advantageous to its ledgers.

Discountstores have currently realized that shoppers are not completelyswayed by the presence of private labels. The ability to win a steadypatronage of shoppers to the discount stores has been extrapolated toend at the limit of 39 to 41%. The need to include manufactured brandcommodities is a decision that would essential transforms thediscount stores in low-level retail chains trading on a similarplatform to the mainstream supermarkets such a Tesco. However, theincrease of private labels by Tesco would then put the megastore atpar with its discounted rival, Lidl. The inclusion of manufacturers`commodities means that the discount chains would be at risk of losingthe cost effectiveness and cheap pricing.

Tesco’ssupermarket brand department is a long term solution to the growthand the subsequent loss of its market share to the discounting storeLidl. However, the Lidl discounting store continues to grow graduallysince its presence is felt due to an effective penetrative strategyin the community established. Proper extrapolation of revenuecollection and market portions by Tesco has also been implemented.The analytic ignorance of the shopper`s market retail supermarkethas led to the unchecked growth of the discounted stores at theexpense of mainstream supermarkets. An underestimation of revenuesthat may be affected by discount stores led to the occurrence of suchdevelopments such that misconceptions maybe avoided. Lidl and Aldihave increased the portion of their market by stocking other brands.However, the effective and cheap supply- chain strategy is maintainedto maintain low price ranges. The above factor is an essential pointthat Tesco may consider exploiting. The presence of approximately 32%of brand manufactured items on Lidl and Aldi`s stores shows thatbrand products are also fundamental in acquiring the trust ofshoppers who are new to the stores. Tesco already stocks a majorityof manufacturer’s brands. Therefore, the megastore has theadvantage of introducing private labels that Tesco shoppers willeasily identify with and buy as compared to shopper’s affinity toLidl’s private labels.

Tescocan mitigate the effects of Lidl`s presence on their market by usingthe rapid growth and prospector strategy. The strategy thatincorporates the Miles and Snow`s prospector type is done to acquirenew markets and maintain the existing markets. The factors affectingdemand and supply in any given market may threaten any company`ssales and revenue margins. Therefore, the use of the prospectstrategy is done to acquire new markets and maintain good sales andprofit margins.

Insummary, it is essential to note that effects of Lidl’s presence onTesco have necessitated the creation of strategies to tackle the lossof shoppers and financial loss. The successful implementation of thestrategies would reduce the rates of loss with regards to shoppers.Mitigation of the factors will also improve the sales margins in thedepartments that have been affected by the presence of thediscounter. However, it is essential to note that the uncheckedgrowth of Lidl in the region will require vigorous implementation ofthe strategies.

2.5 Effect of the presence of Lidl in Barking on Tesco at Beckton

Thepresence of Lidl in Barking on Tesco has resulted in the loss of aconsiderable retail market share by the retail giant, Tesco. Variousevents could occur if Tesco fails to implement strategies thatprevent loss of the retail market portion to Lidl. The rise of Lidlwill also lead to the occurrence of such events in the retail marketat the expense of Tesco. Thepresence of Lidl in Barking has had a significant impact on Tesco atBeckton. Various departments have been affected by the presence of adiscount supermarket. The departments affected range from appareldivision, the food category dry foodstuffs, cereal and milk. Otherareas in Tesco affected by the presence of the discount supermarketare the furniture and household items section.

2.5.1 Loss of jobs reduction of staff numbers

McCarthy2011 notes that loss of jobs or a reduction of staff numbers is aprobable occurrence due to the presence of the Lidl store. Tesco`sneed to reduce the number of staff due to the presence of Lidl hasled to a reduction in the growth rate of its new stores. Further,Jones et al. 2005 opine that the reduction in capital expenditure hasalso led to the reduction in staff to enable the retail giant to cuton costs. The exodus of some of its shoppers to Lidl and Aldi, is dueto the offer of cheaper alternatives to the traditional megastoresuch as Tesco.

2.5.2 Effect on various departments

Theimpact of Lidl’s presence on apparel’s division may occur asminimal or less clear. However, Tesco has reported a steady declineof shoppers in the apparel department. The cumulative loss ofshoppers with respect to the apparel division stands at anapproximate 13.75%. The rate of loss clearly shows the significantimpact of Lidl’s presence on the Tesco, Beckton branch. Apparelsales increase when a seller offers discounts. Hence, the presence ofthe Lidl discount supermarket creates an attraction point in themarket that drives people to its aisle, at the expense of Tesco.

Accordingto Guy 2010, the food section at Tesco is a department that has beenaffected the presence of Lidl in Barking. The retail giant hasreported a steady decline in the foodstuff category as Lidl continuesto increase its household penetration campaign with its private labelstrategy. The losses observed are minimal although a decline in saleshas been observed. The presence of manufacturer’s brands at Tescohas traditionally created a patronage of shoppers, who havecontinuously relied on Tesco for goods due to the success and qualityoffered by the brands. The impact of Lidl at Barking on Tesco atBeckton has occurred due to the growth of affinity by shoppers toprivate labels that are of good quality but cheaper price.

Lidlhas also impacted negatively of Tesco`s household item and furnituresection. The price differences between electronics sold at Tesco andthose of Lidl differ greatly with Lidl offering cheaper rates ascompared to Tesco.

Itis conclusively to note that Lidl’s presence has had a negativeeffect on Tesco. Tesco has gradually reported a decline in variousdepartments. This is due to the attraction of shoppers to Lidl due tocheaper and competitive prices. The effects are immense such that thereduction of staff is a viable option for the superstore. Ultimately,but rarely, the superstore may have to relocate to smaller premise ifthe competition offered by Lidl is not analyzed and it effectsmitigated.

CHAPTERTHREE

METHODOLOGY

Inorder to aid in the analysis and to answer the research questions,the research paper will base its study and sample analysis from theshoppers randomly selected at the two stores. Scholarly articlesconcerning the topic under research shall also be used to obtainedessential data for the analysis of the effects of the Lidl discountstores on Tesco`s profit margins and market share. Nardo et al. 2005note that the use of questionnaires targeting both the Lidl shoppersand Tesco shoppers will be handed out at the respective stores. Thedata obtained after the interview with the respective storesmanagement will be incorporated in the effects part of the research.Singh 2006 notes that authenticity of the data collected will beenhanced by the use of similar questions in every questionnaire toprevent bias in the study. Magazines, journals, articles andscholarly reviews concerning the effects of discounted shopping onmainstream shopping shall also be used.

Theuse of randomly answered questionnaires in the locality will aid inthe collection of data over a wide area be used. This will ensurethat the methodology is cost effective enough to include a wide baseof data. Levin 2008 notes that standardization of questions will bedone to prevent prejudice of the information in the research paper.Each and every respondent will answer similar sets of questions somewith multiple choices and blank question choices. The open questionchoices will analyze the respondent`s answers in terms of support orrejection of the question asked.

Thepresence of closed questions in the questionnaire will offer theimpression that the researcher is unable to interpret the meaning ofthe answers acquired after the exercise. However, avoiding such anoccurrence will be done by structuring the question in certainsections to obtain the ‘yes/no` or ‘not sure` answers. Burns etal. 2008 note that ambiguous answers in any question will also leadto cancelation of the question.

Thepossibility of acquiring large data samples or sets shall be eased bythe availability of repetition of the questionnaires. Use of a singlequestionnaire will reduce the costs associated with circulatingdifferent questionnaires and the amount of time wasted ininterpreting data obtained. Andersen et al. 2010 notes that ease ofrepetition will offer the possibility of acquiring a response from alarge number of people due to the large volume of data that will beobtained. To access data from a wide area, the use of hand outquestionnaires will be ideal.

3.1 ResearchDesign

Accordingto Cooper 2003, the research paper will use both the qualitative andquantitative techniques to analyze the data samples collected. Thequantitative techniques will offer an inquisitive approach methodthat will suitable in establishing the nature of the program based onthe following

1.The effects are arising due to the presence of a Lidl in Barking onTesco located in Beckton.

2. Theviews of the shoppers on the commodity prices and their ratings onthe service delivery offered by the two stores.

3.The effects of the presence of the Lidl discount store on spendingbehavior.

4. Thechoice of quantity over value while shopping in a discount store.

Malterud2001 opines that the suitability of the inquisitive and numericalmodel approach is due to the nature of its investigative ability.Patton 2005 note that the above ability ensures that all factors areput into consideration, hence producing a research paper that hasbeen adequately documented. The use of questionnaires was used toobtain the views of the shoppers regarding their experiences atshopping at Lidl or Tesco. Parker et al. 2008 note that use of thesame questionnaires was also used to obtain the rate of servicedelivery.

Thequestionnaires issued targeted a maximum of 100 people. 60 of thosewere shoppers targeted directly at either store while the remaining40 were made up of students, families and friends. The questionnairescarried a limited number of ten questions. The clarity and easystructures of the questionnaires make the questions easy to grasp andanswer. The length, format, paper size and color are factors thatwere considered while drafting the questionnaires. According to Duff2001, protection of employer and employee identity will regard totheir views will be of significant importance. Vogt 2007, opines thatethical form ensures that the research paper adheres to theconfidentiality intended of this paper.

3.2Data Collection

Accordingto Sapsford et al. 2006, the study sample comprised of a single setof data sourced from the London suburbs of Barking and Beckton. Allthe shoppers, students, friends and families sourced to participatein the program were from the above region or with proximity to eitherLidl discount stores or Tesco. Creswell 2013 notes that use ofhandout questionnaires to collect sample of information was importantsince it offered an effective means in cutting costs as analternative of manual sampling. The ample time accorded forcollection of data ensures that enough data is collected for thestudy. Early liaison with the respective supermarkets also made iteasier to conduct the questionnaire exercise on their premises. Thefindings of the research paper are also important to the discountedstores analysts, retail market, and main supermarket chains such asTesco and brand manufacturers such as Unilever or Proctor &ampGamble.

Accordingto Sweeney 2002, the anonymous nature employed via use ofquestionnaires gives the respondents the desired privacy they need,ensuring that data is obtained from a large number of people fromvarious classes. The nature of anonymity also gives the respondent afeel of security since they will not be victimized based theirpersonal views. Further, Clifton et al. 2002 note that respondentsare more willing to reveal more information genuinely without fear ofstigmatization based on the nature of response. According to Garfield2002, due to the large number of respondents, the researcher will notinfluence the findings or results obtained from the questionnaires.Therefore, primary data will be sourced from the use of the abovestructures. Granello et al. 2004 note that authenticity of dataobtained from authentic websites will be done through the marking ofinternet data with the source.

Accordingto McLafferty 2001, various challenges were observed when conductingthe study. Response from shoppers seemed negative although thesituation changed with time. A limited number of questions in thequestionnaires produced meant that the few questions would askprecise questions that would effectively give answers to the researchquestions. According to StataCorp 2007, the use of proper grammar andstructure analysis software aided the production of precise andproperly drafted questionnaires.

Anotherchallenge was arriving at a suitable sample size and value toquantify or qualify a particular of answer for certain questionsasked. Harwood et al. note that limiting the questions to ten is toensure the participants pay attention to the questions asked.According to Demšar 2006, the choice of a small sample and the studywill lock out a large number of people whose data would be used toquantify of qualify the effects of the study. According to Silverman2011, large sample sizes donate authenticity and validity to theresearch exercise. However, the amount of time involved in thepreparation of the questionnaires, the logistics also involved provecostly to the whole exercise.

Additionally,I conducted an interview on the managers of both Tesco and Lidlconcerning their market share as a fundamental part of the researchprocess in order to get an insight of the strategies that each ofthem are adopting in order to make sure that they remain competitivein the market. Most importantly, I sought to find out why Tesco waslosing shoppers to the Lidl discount store despite its dominance inthe retail market. Moreover, to determine the strategy that Tescoopined to use in its bid to regain the market share under thesignificant threat from Lidl was part of the interview processbecause profit and sales margins dropped for Tesco. The interviewsought to inquire about the price-cut strategy that Tesco intends touse in the various departments in order to prevent further loss ofits shoppers to the discount offering Lidl retail centres.

Onthe flipside, the interview with the manager of Lidl sought to findout its penetrative strategy in the regional market that had enabledit amass quite a number of shoppers relatively higher than Tesco.Additionally, the use of the private labeling strategy by Tesco wasgoing to affect sales margins at Lidl, but at what rate and how muchlevel is what my interview sought to unravel. Lastly, I wasinterested in establishing the market penetration rate of Lidl at theexpense of Tesco and how it had seen it grow as well as identifyingthe strategies that were supposed to be used to maintain constantmarket growth at the expense of Tesco?

CHAPTERFOUR

RESULTS/FINDINGS

Toavoid collapse of the whole exercise, the study used of a limitednumber of questionnaires, 30 for shoppers at Lidl and 30 for shoppersat Tesco. The remaining 40 questionnaires were split among Newhamstudents community, families and friends. The questionnairesstructured for the local and close adjacent community were designedto obtain general data concerning the effects of the presence of Lidldiscounted stores in Barking on the Tesco superstore in Beckton. Thefollowing data tables show the rate at which Tesco has been affectedby Lidl.

Table1: Market share data adapted from theheraldnewspaper, UK.

Effect/ Market share

Lidl discounter in Barking

Tesco superstore at Beckton

2009

2.46%

40.4%

2010

2.61%

34.8%

2011

2.56%

36.5%

2012

2.97%

31.7%

2013

3.0%

30.2%

2014

3.54%

28%

Table2: Variable data collected from the analysis of the questionnaire

Variables

Category

Frequency

Percent (%)

Gender

Male

Female

36

64

36

64

Age

18-24

25-34

35-44

45-54

55 and above

25

21

30

18

6

25

21

30

18

6

Occupation

Self-employed

Government officer

Private officer

Unemployed

Other

20

30

24

16

6

10

20

30

24

16

6

10

Income

Below (£) 30,000

30,001-60,000

60,001-100,000

More than 100,001

20

61

16

3

20

61

16

3

Preference

Quality

Quantity

24

76

24

76

Preference

Lidl

Tesco

81

19

81

19

The96 and 34 shoppers are part of the 100 sample group interviewed. The96 respondents prefer shopping at Lidl due to its competitive pricerange. Out of the 96 respondents, 34 of them shop at Tesco and Lidldepending on the item sought.

Table3:

Thegrowth and inflation rate of Lidl and Tesco. Data has been adaptedfrom the Kantar business analysis page mediated by the grocerindustry news.

Grocer

&nbsp&nbspInflation and growth rate (%)

Feb 2, 2014

+2.9%

Nov 10, 2013

+2.9%

Sept 15, 2013

&nbsp+4.8%

&nbsp&nbspJuly 7, &nbsp2013

&nbsp+4.65%

&nbspJune 10, `12

&nbsp&nbsp&nbsp+2.6%

&nbspApril14,`13

&nbsp&nbsp&nbsp&nbsp +5.3%

April 2012

&nbsp

&nbsp Tesco

27.7-&gt26.0%

28.0-&gt&nbsp26.5%

-6.0%

28.7-&gt26.8%

&nbsp-5.6%

28.8&nbsp&gt&nbsp27.6%

-4.4%

&nbsp&nbsp &nbsp28.6%&nbsp

&nbsp&nbsp +2.8%

&nbsp&nbsp&nbsp 28.4%&nbsp

&nbsp&nbsp&nbsp&nbsp -0.9%&nbsp

&nbsp&nbsp 28.2%

&nbsp Lidl

5.7-&gt&nbsp6.6%

6.3-&gt&nbsp6.9%

+8.2%

&nbsp

&nbsp+13.1%

&nbsp6.7-&gt&nbsp&nbsp7.4%

&nbsp+10.6%

&nbsp&nbsp&nbsp&nbsp&nbsp6.6%&nbsp

&nbsp&nbsp +7.3%&nbsp

&nbsp&nbsp&nbsp&nbsp&nbsp &nbsp6.6%&nbsp

&nbsp&nbsp &nbsp +7.3%

&nbsp&nbsp&nbsp &nbsp6.2%

&nbsp Aldi

5.9-&gt&nbsp7.2%

6.2-&gt&nbsp7.4%

+19.4%

&nbsp

&nbsp&nbsp

&nbsp +24.3%

&nbsp5.5-&gt &nbsp7.0%

&nbsp+27.3%

&nbsp&nbsp&nbsp&nbsp&nbsp6.5%&nbsp

&nbsp&nbsp +2.8%&nbsp&nbsp

&nbsp&nbsp &nbsp+0.9%

&nbsp&nbsp&nbsp&nbsp&nbsp5.7%

Inaddition, interviews conducted on the managers of Tesco and Lidl shedlight on the penetration rate of Lidl at the expense of Tesco. Therate of penetration of Lidl in the regional market was currentlyrated at an average of 3.2% at the expense of Tesco that was losingits market share as a result. However, Tesco’s strategy to regainmarket share is via the use of Lidl’s private label strategy. Themanager opined that Lidl’s market share should drop by 0.5% due tothe brand’s affinity and loyalty to the traditional grocery chainthat Tesco had established before the incursion of Lidl into themarket. Further, the use of competitive pricing strategy by Tescowould aid in regaining the market share lost. However, Lidl’smanager opined that it will maintain gradual growth in the retailmarket via the use of cheap price margins and discounts.Additionally, the manager postulated that they hope to uphold agrowth rate of 1.6% per annum due to use of private labels and fewermanufacturers’ brand.

Itsummary, it is imperative to note that the findings is the center ofthe research. Hair et al. 2010, the findings of the methodology aidin interpreting the success and effects of the research topic throughqualitative and quantitative methods.

CHAPTERFIVE

DISCUSSION

Itwas clear that most of the customers were pleased with the ideadiscount retail outlets. Of the 100 hand out questionnaires given tothe respondents, there were 100% response rates from theparticipants. Based on the 100 who responded through thequestionnaires, 81 (81%) of the respondents believed that Lidl andAldi had a competitive advantage due to their application of thediscount and cheap price strategy. Among the shoppers, (96%) agreedthat discount shopping had huge significance on the traditionalsystem of the retail industry. The 96 respondents interviewed alsofavored shopping at Lidl as compared to Tesco. However, 34% of thesame shoppers interviewed also shopped at Tesco despite complaints ofhigh prices and poor service in the fresh foods section. The graphpresentation below adapted from table1 shows the market share of Lidlagainst Tesco. The growth rate uses full data concerning the retailsector of United Kingdom but narrows to the two targets Tesco andLidl.

Graph1: Market share of Lidl and Tesco.

Thegraph clearly shows the gradual increase of Lidl’s market share atthe expense of Tesco. There is indication of loss in sales and profitmargins hence Lidl’s presence in the market has an effect onTesco. The penetrative effect of Lidl has been gradual since itsinception in the United Kingdom. 81 respondents felt the presence andeffect of Lidl’s presence in the market as compared to 19respondents who favored Tesco. The 81 respondents culminate into 81%effect rate of Lidl over Tesco. The penetrative effect shows the rateof market share growth over a period of six years from the year 2009.However, the rates of fluctuation vary during a year, hence, annualaverage figures were used.

Ajzen’stheory of reasoned action opines that individual s are driven towardschoices that influence behavior that is dependent on intention. Thediscount stores intend on attracting shoppers to its aisles via useof price cuts. The shoppers reason they could save a portion of theirincome if they shop at discount retail outlets. Hence, the growth ofLidl has been signified by the above theory.

Marketshare vis-à-vis the various market players and rate of growth andinflation shows the rate of growth of Lidl at the expense of Tesco.The growth and inflation rate of the retail and grocer industry ispresented in the graph below. The graph shows variables in terms ofgrowth rate in percentages against time. The graph captures the rateof growth of Aldi, Lidl and Tesco from 2012 to the current year.

Graph2: The growth and inflation rate graph.

Inaddition, there were a large number of respondents taking part in theresearch. A large number of respondents are made up of students,family, friends and shoppers. According Everitt 2001, use ofstatistical software to analyze data will aid in creation of preciseresults. The market inflation and growth rate of Lidl and Aldi ascompared to Tesco is gradual. As represented by the graph.

Thesupermarket and grocer retail industry will be relying on the resultsto project future sales and occurrences due to market dynamics. Theresult will also influence the level of retail analysis done by bothdiscount supermarket chains and the megastores. The acquisition ofthe information in the research study shall offer an insight into thelevel of penetration, both chains have in the retail market anessential factor to be considered during the formulation of marketingstrategies. According Milton Friedman’s permanent income theory ofconsumer spending, the level of spending of any individual isdependent on the amount of constant income they get overtime.Therefore, retail markets are not unique to the various incomelevels hence some spending behaviors are favored in certain markets.The recession has made it easier even for high income households tominimize excessive use of the disposable funds via use of discountand bargain facilities.

5.1 Lidldiscount supermarket against Tesco

Theresults obtained from the questionnaire, clearly show thatapproximately 96% of the respondents preferred to shop at thediscount store. The income bracket of shoppers interviewed showedthat many came from the middles class in society and had the choiceto shop at either Tesco or Lidl but preferred Lidl due to cheapprices and discounts it offered. 61% of the shoppers were female whoaccording to market analysts have the power to sway or influence thedynamics of a retail industry.

5.2 Brand affinity and private labeling

Brandaffinity is a strategy that traditional supermarket chains used togain the loyalty of shoppers. Accordingto the Lidl manager, the quality of the brand is also used to captureand retain shoppers. However, the inclusion of the manufacturer’sbrands in Lidl might be detrimental to its growth as a discounter ifthe levels of stocking are unchecked.Theprovision of quantity over quality due to stocking of private labelswill also increase the sales margins. Furthermore, consumer behaviortheory notes that shoppers are driven to spend less to acquire moreitems a single manufacturer’s brand is deemed to be of quality todue to the building of the brand name.Retainingthe market is a factor essential to both Tesco and Lidl. Tesco’smanager opines that the chains may open smaller stores with modestthemes to cut on costs and attract more shoppers. However, Lidl’smanager is categorical that Tesco may not succeed fully onimplementing the private label strategy since there is a historicalworking relationship with brand manufacturers.Hence, Lidl’s private label strategy has created an advantageousposition for the discount supermarket translating into higher salesmargins, low costs and effective market penetration. The supermarketchain according to the manager is set to increase its share of themarket gradually by a rate of 0.6 to 1.6%. Further, the effect ofLidl’s hold on the retail market at the expense of Tesco issolidified by the response shoppers are giving. Despite shopping atboth Tesco and Lidl, majority of the shoppers still favored thediscounter in terms of satisfactory services and quality of goodsoffered in the grocer and fresh foods section. The above sentimentsupported by 34% of shoppers who preferred to shop at Tesco alsoshopped at Lidl for specific items such as groceries that they opinedto be fresh. However,the Tesco manager notes that brand affinity and loyalty will aid thechain in retaining its market share at the expense of Lidl. Theintroduction of private labels in specific departments such asgrocery section is to woo shoppers back through provision of qualityproducts without the inclusion of manufactured brands.

Fromthe questionnaire, it is evident that majority of shoppers haveresorted to shopping at Lidl since its inception to enable them cuton spending a major factor driving consumer spending behavior.

The96 respondents interviewed preferred to shop at Lidl while 4 stillpreferred the superstore. 76 % of the shoppers opined they wouldchoose quantity over quality while shopping. Tesco’s retailservices were rated at 3 which gave it an ‘okay’ pass mark ascompared to Lidl’s mark of four, showing it offered good retailservices.

20respondents interviewed were students, 30 were self employed, and 24were public officers, 16 worked in the private sector, 6 wereunemployed while 10 fell under the ‘other’ category. 80% of therespondents earned an income of between 30,000 to 100,000 poundswhile the rest earned below £30,000. The results clear show that themisconception about Lidl targeting the low class in society is falseas many middle income shoppers patronize the discount supermarket.

96respondents rated Lidl’s products to be similar quality to Tesco’sproducts. However, 4 respondents opined that Tesco stocked superiorquality products as compared to Lidl. 56 respondents opined that Lidlis at par with Tesco. However, they also opined that Lidl is growingat high rate despite Tesco’s domination of the retail market. 22respondents opined that Lidl’s not at par with Tesco in terms ofservice delivery and quality while 22 did not have an opinion orwished not to divulge their sentiments. Further the wheel theory ofretailing clearly shows how market forces are centered mainly onprice cuts. The theory opines that the cyclic relational effectsobserved in the retail industry offer paths for the low cost entrantswho acquire a considerable portion of the given market share in ashort period.

CHAPTERSIX

CONCLUSION

Thedata collected during the research process has proven that thepresence of Lidl in Barking has a negative effect on the Tescosuperstore located at Beckton. The data analysis has also proven thatTesco has gradually incurred losses overtime since the discountsupermarket increased its rate of penetration into the retail marketusing the private label strategy and the coupling of cheap priceranges offered by its product, hence the discount effect. Despite thereliance of Tesco on the traditional loyalty scheme, it is a factthat Lidl has chopped of a sizeable share of the retail market by upto 4%. The misconceptions concerning the discount supermarkets haveaided its gradual growth and acquisition of a considerable marketportion. The above development poses a threat to superstores such asTesco. The various effects of Lidl’s presence on Tesco have anoverall negative effect on the superstores’ profit margins. Theeffect has led to the resignation of the groups’ chairman, and acheck on its levels of staffing at stores that are reporting losses.

Inorder for Tesco to gain back its market share, analysts opine thatimplementation of solutions to prevent exodus of shoppers. Thesolutions include inclusion of private labels and discounts in commontarget departments to create competition with the discountsupermarket.

Itis conclusive to note that the presence of Lidl discountedsupermarket in Barking on Tesco superstore at Beckton is significant.Colla 2003, notes that the presence of a discount supermarket hasaffected the sales and profit margins of the superstore in variousdepartments effects that have been felt by the superstore. However,according to Wrigley 2010, the effects may be deemed minimal butcontinuous growth of Lidl and the consistent market penetration intohouseholds creates a threat to the margins of the superstore. It isprudent that Tesco mitigate the above factor or face a continuousloss of shoppers to the discount supermarket.

Itis evident from the findings that Lidl was the preferred supermarketof choice among the sample group interviewed. The 96% rate of favortowards Lidl shows the effect that its presence has on the Tescosuperstore. Despite 34 % of shoppers shopping at Tesco, they stillshopped at Lidl a clear indication of the penetrative effect thatLidl has on the regional retail market dominated by Tesco. The ratingof Tesco’s services as ‘okay’ showed the concerning failingtrend that analysts also reported concerning the giant retailer. Therespondents mainly complained about the fresh foods section that theyopined had poor service as compared to the Lidl discount supermarket.

80%of the respondents earned an income of between 30,000 to 100,000pounds while the rest earned below £30,000. The above finding alsorefutes the misconception concerning the discount store being set upto target the low class in society. The quality of products accordingto the respondents from both retailers was at par. However a largenumber opined that Lidl stocked quality items regardless of the useof private labels. The effect of Lidl in Barking on Tesco at Becktonis negative, challenging the retail giant on its share of the marketand minimizing the profit margins.

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APPENDICES

Thisquestionnaire is meant to ask the respondent questions concerningtraditional supermarket shopping and discount shopping with a viewof realizing whether Lidl in Barking has an effect on Tesco atBeckton. We would want to know your opinion on what kind of shoppingmode would you choose. Please know that your identity cannot berevealed to anyone and will be safely concealed only for the purposesof this study. Your respondence in this study will be highlyappreciated.

SectionA:

1. Gender Male ( ) Female ( )

a. Howold are you?

18-24 ( ) 25-34 ( ) 35-44 ( ) 45-54 ( ) 55 and above

2. Doyou shop at Lidl? Yes ( ) No ( )

3. Doyou shop at Tesco in Beckton? Yes ( ) No ( )

a. Whichretail store would you choose for your shopping?

I. Lidl( )

ii. Tesco( )

4. Wouldyou choose quantity over quality when it comes to shopping?

Yes () No ( )

5.Rate Tesco`s services, (please tick one)

1( ) 2 ( ) 3 ( ) 4 ( ) 5 ( )

Scale:1- bad service, 2 – lackluster, 3 – okay, 4 – good, 5 –Excellent

6.Rate Lidl`s services, (please tick once)

1( ) 2 ( ) 3 ( ) 4 ( ) 5 ( )

Scale:1- bad service, 2 – lackluster, 3 – okay, 4 – good, 5 –Excellent

7. Whatis your occupation?

Student( ) Self-employed ( ) Public Officer ( ) Private sector officer () Unemployed ( ) other ( )

8. Whatis your level of Income?

Below£30,000 ( ) 30,001-60,000 ( ) 60,001-100,000 ( ) 100,001 and above ()

9. CompareTesco products with Lidl’s products?

10. IsLidl at par with Tesco in terms of quality good and service delivery?(Please tick one)

Yes No Don`t Know

Managerialinterview with Tesco

  1. Why is Tesco loosing shoppers to Lidl at a high rate?

  2. What strategy is being used to maintain or regain market share lost to Lidl?

  3. What are the effects that Lidl presence has on Tesco?

  4. Does Tesco aim to open smaller stores similar to Lidl that will carry a modest theme?

  5. To regain market share, how does Tesco intend to solidify its hold on the retail market despite Lidl’s continuous growth?

  6. What is Tesco doing to ensure there is supply of quality and good services to shoppers?

Managerialinterview with Lidl

  1. What is Lidl’s penetrative strategy and how does it aim to solidify its market presence?

  2. How does the use of private labeling strategy by Tesco affect the rate of Lidl’s market penetration rate?

  3. Does Lidl intend on stocking manufacturer’s brands in its aisle?

  4. How will introduction the introduction of manufacturer’s brands affect the sales margin of Lidl?

  5. Will Tesco’s introduction of bargains affect the overall price margins of Lidl? how will this reflect to the company’s growth?

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