A Critical Comparison of Tesco and Sainsbury

In this assignment, there will be a critical comparison of the UK’s biggest retailers Tesco and Sainsburys, outlining their marketing strategy, the key factors of their success and also the advantages and disadvantages of both companies. Also there will be, analysing the two companies in terms of size and perception, in the sense of the growth of both companies over the years and perception on how the Tesco and Sainsburys are perceived by their customers and also themselves.

Also in this essay will be comparing the two companies financial turnover, their market share and market growth. I will be outlining the general performance of Tesco and Sainsburys in terms of how they are doing which is how they have grown over the years with the products and services they offer their customers.

Tesco has the biggest market share of 31.6%, in which they are controlling a large sector of the retail market and they also run 50% of the grocery market while Sainsburys has 22% of the market share. They sell a huge product range and they buy in big volume and sell it cheap while Sainsburys only buys products with popular names and their own branded products. They have the supermarket super power which is their location, Tesco largest acquisition that enabled them to acquire nearly 1/3 of the retail market but Sainsbury do not have this power of land acquisition.

Tesco has achieved this level of success by selling Everything-products, Everywhere-place which is national and overseas, Everyone- people, they target everyone. With this strategy Sainsburys have had a hard time keeping up with the retail giant. Where Tesco tries to attract people from all classes of people Sainsburys on the other hand attract the middle class people with their middle class prices and Tesco is all bout by reducing their prices to attract heir customer Sainsburys is particular about the quality of the food they offer their customers.

Tesco is also the second clothing retailer with their clothing range Cherokee and Florence and Fred brands. They are also the second mobile top-up retailer in the UK. While Sainsburys is trying to caught up by just introducing their clothing range when they employed the former Bhs buying director to take up the role as a buying director for its Tu clothing (Retail week, 2005, p2) and they don’t offer any mobile top-up services.

Profits and turnover: Tesco, the UK’s biggest supermarket group as delivered their first-half profits of more than Ð'Ј1 billion and beat City forecasts on growth. Their profits also reached Ð'Ј1.13 billion in six months at the end of august against predictions, but Britain’s number-one retailer posted at Ð'Ј1.152 billion. They sales also rose by 10.2%- with non-food sales jumping by 12.6% and the also built on their intentional expansion plans, improving overseas sales by 21 %. The total sales at Tesco for six-month period hit Ð'Ј22.7 billion, a rise of 12.7% on the same period last year. (Times online, 18/10/2006)

They have continued to deliver their customers with great products and services which are reflecting on their profits t the end of the trading year.

Sainsburys on the other hand, the chief executive of Sainsbury’s said �We have continued our good sales performance during the second quarter of the year and have benefited from spells of good weather and the focus this places on fresh and healthy food’. Total sales for quarter two up 7.6 percent (8.0 percent excluding petrol) Like-for-like sales for quarter two up 6.5 percent (6.6 percent excluding petrol) Total sales for first half up 7.8 percent (7.4 percent excluding petrol) (jsainsburys.co.uk)

J Sainsbury, Britain's third-largest supermarket group, reported its seventh quarter of successive sales growth, pushing up underlying sales, excluding petrol, by 6.6 per cent over the 16 weeks to October 7. Second quarter underlying sales growth at Sainsbury's was ahead of the first quarter, when underlying sales increased by 5.7 per cent, higher than most analysts had forecast. (Times online, 27/10/2006)

The most important market strategy to both companies is to be the market leader. Tesco has continued to improve this strategy by reducing their prices in which has made it hard for rivalry companies to put up with companies like Sainsburys who’s prices are not as low as the Tesco prices.

The leader has the largest market share and usually leads the other firms in terms of price changes, new product introductions, distribution coverage and promotion spending. The leader may or not admired but other firms forfeit its dominance in the industry. (Kotler,2001,p430)

In this case, Tesco is the largest food retailer in the UK and has proved to be the market leader to rivalry competitor Sainsburys. They have kept a constant look at the growing desire on the consumer constant quest for new and cheap products this in which Tesco have proved to be their main priority as they have continued to introduce new products and also at cheap prices. They also have the strap line �Every little helps’ (Tesco.com, 2006), this shows that they care for their customers and will continue to lower prices in order to gain customer loyalty and to be the market leader. With this strategy Sainsburys have had a hard time keeping up with the low prices as that are the second largest food retailer in the UK. Sainsburys also have the strap line �Good food cost less at Sainsbury’s’ (Kotler, 2005, p689) this describes their healthy range and yet at a cheap price. They have also started selling organic food at cheap prices which in my opinion is a wrong move because rival food retailer Waitrose already has the reputation of selling organic food products

Another marketing strategy undertaking by both companies is branding. This have both introduced the Tesco value and Sainsburys value which will help their customers who are on a budget.

The concept of a �brand’ in the consumer’s mind has developed through long familiarity with the retail food products backed up by powerful marketing techniques. (Blackwell Science Ltd, 2002, p13).

This concept has enabled consumers to buy their products at a cheap price and also with almost the same quality and the top brand like Nestle and Heinz. For example a can of baked beans as a Tesco or Sainsburys value will be about Ð'Ј0.29 where as a top branded product a consumer will be paying a prices like Ð'Ј2.99 which for most customers the will rather go for the cheaper beans and the know they will be getting almost the same quality as a branded product.