Fairfield School of Business

BA5F01 – BUSINESS DECISION MAKING

 Abstract
Supermarket industry of UK is one of the largest industries composed with a huge number of
both indigenous and foreign competitors. Entering into this industry require extensive
analysis of the existing competitors in terms of their product variety, profitability, and the
convenience they offer to the customers. Therefore, this study provides an overview of the
overall supermarket industry in comparison with Lidl a small but rapidly growing
supermarket in UK. Both primary and secondary data sources are used to conduct this study.
Primary data has been collected through physical survey. A structured questionnaire
composed with 15 questions are used to collect the opinion from existing customer of Lidl.
Companies annual report, websites, and other sources are used to collect the secondary data.
Basically, key financial data such as revenue, market share, operating profit, and gross profit
margin are collected for analyzing the industry. The findings show that, Lidl is gradually
increasing its market share in supermarket industry of UK along with the steady sales growth
and operating income.

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 Table of Contents
Introduction.........................................................................................................................................3
Primary Data collection......................................................................................................................4
Analysis of Primary data....................................................................................................................5
Demographic Information..............................................................................................................5
Factors that attract customers to shop in Lidl...............................................................................8
Customer preference in Lidl.........................................................................................................10
Secondary Data collection.................................................................................................................11
Secondary Data analysis...................................................................................................................11
Market share..................................................................................................................................11
Revenues of the selected companies of Supermarket industry in UK........................................12
Operating income of Lidl and others firm...................................................................................13
Key findings of the analysis..............................................................................................................14
Conclusion and recommendations....................................................................................................15
References:.........................................................................................................................................15
Presentation.......................................................................................................................................16
Appendices.........................................................................................................................................21

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Introduction
The retail chain and supermarket industry are one of the biggest industries having a numerous
giant and small firms. This industry is gradually becoming competitive because the
competition among the small, medium and largest firm of the supermarket is continuously
increasing in terms of the product variety, pricing, discounts and other services. All the firms
are fighting for capturing the highest market share. However, it is important for the decision
makers to understand the factors that attract customer and determine the individual
preferences to shop from a particular shop. Therefore, this study intends to provide useful
information towards the customer preferences along with the brief overview of the selected
companies including their market share, revenue history and profitability. Both primary and
secondary data has been collected in order to conduct the study. The first part of the report
showed the analysis of the primary data and second part of the report analyses and represent
the secondary data. In addition to, this study endeavors to provide some useful
recommendations for the decision makers based on the primary and secondary data analysis.

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Primary Data collection
Primary data are the first-hand raw data which has been collected in original format without
any change or manipulation. Generally primary, primary data is collected through survey
questionnaires, interviews and experiments etc. In order to conduct this study, we have used a
structured questionnaire containing 15 questions for collecting primary data. This
questionnaire has been distributed among the five customers those who used to shop from
Lidl. All the questioners are filled up by the respondents and successfully returned. The
questionnaire of this survey is attached in Appendices. However, collected data are presented
here in a tabular format.

(a) Demographic information

Variables Options Frequenc

y
Age Less than 20 years 2
21 to 25 Years 8
26 to 30 years 3
31 to 35 Years 1
36 to Above 1
Gender Male 6
Female 9
Level of Education Elementary School 2
High School 4
Undergraduate 7
Graduate 2
Average Monthly Below 500 Pounds 1
spending 501 - 1000 Pounds 8
1001 - 1500 Pounds 4
1501 - 2000 Pounds 2
Above 2000 pounds 0
Average Monthly Below 1000 Pounds 2
Income 1001 -1500 Pounds 7
1501 -2000 Pounds 5
2001-3000 pounds 1
Above 3000 pounds 0

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 (b) Factors that attract customers towards Lidl

Sl. Statement Yes No

1 I prefer to shop from Lidl because it is located in my convenient 12 3
location.
2 I prefer Lidl because of their pricing 10 5

3 I used to shop from Lidl because it offers more discounts 7 8

compared to other supermarket
4 I prefer Lidl because it is more convenient to shop from Lidl 12 3

5 The current sales volume attracts me to shop from Lidl 9 6

6 I prefer Lidl because it offer wide range of Products 10 5

(C) customers preferences to Lidl

Sl Question Yes No
.
1 Do You prefer Lidl in terms of the product variety it offers? 10 5
2 Do you prefer Lidl in terms of the branded products it offer? 13 2
3 Do you prefer Lidl in terms of the online sales it makes? 9 6
4 Do you prefer Lidl in terms of the physical ambience and space 12 3
available in the shop?

Analysis of Primary data

Demographic Information
Demography refers to the population. It involves All the characteristics or attributes of
population. We have distributed questionnaire to collect information about the customers.
The first part of the questionnaire is designed to collect the demographic information of the
customers. Table-1 represented the demographic information of the respondents who took
part in this survey. As part of demographic information, we have collected the basic
demographic information such as age, gender, level of education, average monthly income
and spending of the customers. We have organized the demographic data in a tabular format
and further represented these data graphically in order to explain each demographic variable.

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 Table-1: Demographic profile of the respondents.
Variables Options Frequenc Percentag
y e
Age Less than 20 years 2 13.33
21 to 25 Years 8 53.33
26 to 30 years 3 20.00
31 to 35 Years 1 6.67
36 to Above 1 6.67
Gender Male 6 40.00
Female 9 60.00
Level of Education Elementary School 2 13.33
High School 4 26.67
Undergraduate 7 46.67
Graduate 2 13.33
Average Monthly Below 500 Pounds 1 6.67
spending 501 - 1000 Pounds 8 53.33
1001 - 1500 Pounds 4 26.67
1501 - 2000 Pounds 2 13.33
Above 2000 pounds 0 0.00
Average Monthly Below 1000 Pounds 2 13.33
Income 1001 -1500 Pounds 7 46.67
1501 -2000 Pounds 5 33.33
2001-3000 pounds 1 6.67
Above 3000 pounds 0 0.00
(Source: own survey)

Gender
Total 15 respondents were asked to fill
Gender

up the questionnaire. Among the

participants 9 were female and 6 were
40%
male representing 60% and 40% of the 60%

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Male Female
total respondents respectively.

Age
Respondents of different ages are Age
chosen in order to conduct this study. 7%
7% 13%

We have classified the age ranges into

five different categories such as 20%

respondents below 20 years of age, 21

53%
to 25 years of age, 26 to 30 years of
age, 31 to 35 years of age, And Below 20 21-25 years
26-30 Years 31-35 Years
respondents above 35 years of age.
Above 35 Years
More than 50 percent of the respondents
are fall under the age of 21-25 years of
age.
Level of education
Level of education of the sample Level of education
population is relatively less important as 8
6
there is low relationship between
4
customers buying decisions and level of 2
education. However, we have collected 0
Level of education
the education data of the respondents in
Elementary school
order to represent their academic High School
background. The maximum respondents Undergraduate
Graduate
nearly 47% of the total respondents
belongs to undergraduate level.
Average monthly Spending
It is very essential to know the Average Monthly Spending

customers average monthly spending Above 2000 pounds

0
pattern as a decision maker of a 1501 - 2000 Pounds 2
supermarket industry. Customers
1001 - 1500 Pounds 4
spending pattern indicates the tendency
501 - 1000 Pounds 8
of customers to spend on different items
Below 500 Pounds 1
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0 1 2 3 4 5 6 7 8 9
 of maintaining livelihood. It also
represents the portion of income that
customers are spending. However, in
our survey, among the 15 respondents
we found that more than 53% of the
total respondents are (8 people)
spending 500 to 1000 pounds monthly.
The second highest in this category
belongs to 1000-1500 pounds.
Average Monthly income
Average monthly Income
Average monthly income denotes the
average earning of customers in a Avobe 3000 pounds
different month throughout the year. As
2001-3000 pounds
marketer, knowing customers income is
very important because company will 1501 -2000 Pounds
generate more revenue if it can capture
the highest pie of the customers income. 1001 -1500 Pounds

In our survey among 15 people we see

Below 1000 Pounds
that, nearly 47% of the people earn
0 1 2 3 4 5 6 7 8
1000 to 1500 British pound per month
and 33.33% people earn above 1500 to
2000 pounds in a month.

Factors that attract customers to shop in Lidl

The following table resent those possible factors that may attract customers to shop in Lidl
compare to another supermarket. We know that there are wide range of factors that can
influence the customers shopping decisions. Whether a customer purchase from a particular
shop or not generally influenced by the location of the shop, the pricing policy including
available discount opportunity, product variety of the store, and overall convenience that a
customer usually wants to enjoy. In our survey we have examined customers opinions based
on the above mentioned. Customers response in relation to the factors are shown in below.

Table-2: Factors attract customers to shop in Lidl

Sl. Factors Frequenc Percentages

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 y (%)
1 Feasible location 12 80.00
2 Pricing 10 66.67
3 Discount 7 46.67
4 Sales Volume 9 60.00
5 Convenience 12 80.00
6 Wide range of products 10 66.67
In our survey we found that most of the customers shop from Lidl because of the feasible
location, affordable pricing and overall convenience Lidl offered to their customers.

Factors Attracting customers

The
Wide range of
products
Convenience

Sales Volume

Discount

Pricing

Feasible location
0 10 20 30 40 50 60 70 80 90

Percentages (%) Frequency

above figure clearly shows that highest number of frequencies lies on convenience and
location which indicates that almost 80 percent of the people believe that the overall
convenience and the feasible location of the store mostly attract them to shop from Lidl.
Besides convenience and location, affordable pricing and available discount opportunity also
attract them to shop from Lidl. This information is equally important for all firms operating in
the retail chain industry. Both new and all firm should carefully consider and incorporate thee
factors in order to increase sales and market share.

Customer preference in Lidl

Simply customer preferences refers to the individual choices regarding product and services.
Variety of factors determine the customer preferences in shopping. In retail chain industry,
the product variety, branded products, online sales, and the degree of physical ambiance and
space significantly determine the individual preferences for shopping from a particular

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supermarket.Table-3 summarizes the factors that detrmine the customer preferences in
shopping from Lidl.

Table-3: Factors Determine customer preferences in online shopping

Sl. variables Frequency Percentage

1 Product variety 10 66.67%

2 Branded Products offered 13 86.67%

3 Online sales 9 60.00%
4 Physical ambiance & Space 12 80.00%

The following chart demonstrted that nearly 87% of respondents argued that Lidl offer wide
ranges of branded products. Physical ambiance and space plays a key role in determining
customer choice of shopping from Lidl. Approximately 80 percent of the customers are
pleased with the existing physical ambiance and space offered by Lidl. Besides this nearly 67
percent of the people prefers Lidl for its product variety.

Factors determine Customer preference

Physical ambiance & Space

Online sales

Branded Products offered

Product variety

0 10 20 30 40 50 60 70 80 90 100

Percentage Frequency

Secondary Data collection

Secondary data refers to the data that has been already collected by some others else.
Secondary data are more organized and structured. We used secondary data of supermarket
industry to make a comparison between other largest firms and Lidl in terms of their market
share, Revenues, operating income, and gross profit marging. Secondary data has been
collected from various sources including Annual report of the comoanies, different websites,
newspaper, and other sources. Most of the financial dat are collected from the annual report

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of the companies. Some data are collected from the different websites due to inavailability of
the annual report. However, the following secondary data has been collected for analysis.

Secondary Data analysis

Market share
Market share indicates the volume of sales a company generates in an industry. It is a
proportion of a company’s sales among the total sales generated by the all companies in an
industry (Baines et al., 2017). It can also be defined as the portion of total customers served
by a single company. Higher market sahre indicates the greater revenue and large customer
base. However, Supermarket industry is constituted by the group of largest companies whose
are intensely compte with each other. The following table (Table-4) represents the percentage
of market sahre holds by the some largest retailer of UK over the last three years.
(www.statista.com, 2020)

Table-4: Market sahre of Supermarket industry

Name of the supermarket 2018 2019 2020

Tesco 27.9% 27.7% 27.3%
Sainsbury 16.3% 15.9% 15.3%
Aldi 7% 7.5% 7.9%
Morrisons 10.8% 10.6% 10.3%
Lidl 5% 5.3% 5.9%
(www.statista.com)

The highest market share occupied

by the TESCO in retail chain industry
representing more than 27 percent
market share in three consecutive Market share
year. In terms of market share, 2018 2019 2020
Sainsbury is a biggest challenger of 30.00%
25.00%
TESCO holding the second highest
20.00%
market share. However, After Tesco 15.00%
and Sainsbury Aldi, Morrisons, And 10.00%
5.00%
Lidl are the great followers of the
0.00%
Tesco Sainsbury Aldi Morrisons Lidl
supermarket industry in UK. All of

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 these companies are holding the
almost similar market share in the
industry.

Revenues of the selected companies of Supermarket industry in UK

Supermarket industry in UK is generally dominated by some giant firms, capturing the
highest sales in the industry. Revenues of these firms are estimated in a billion. We have
shown the revenues of four biggest firm in single table and the revenues of Lidl in another
table because the revenue base is shown in a million for Lidl. (Sainsbury, 2020),

Table-5: Revenue trend of largest supermarket in UK

Name of the 2016-17 2017-18 2018-19

supermarket (in Billion (in Billion (in Billion
Pound) Pound) Pound)

Tesco £49.90 £51.00 £56.90

Sainsbury £29.11 £31.74 £32.41
Aldi £8.74 £10.80 £11.33
Morrisons £16.30 £17.30 £17.70
(Source: Annual report of the companies)
Table-6: Revenue trend of Lidl for last three years
Name of the 2016-17 2017-18 2018-19
supermarket (in million (in Million (in million
Pound) Pound) Pound)
Lidl £344.20 £418.60 £474.50
(www.statista.com)

The following charts represented the revenue history of Lidl and other biggest firms of
Supermarket industry in UK. Lidl had a consistent growth in sales revenue in the last three
years having more than 13 percent sales growth in last financial year. Tesco, Sainsbury, Aldi
and Morrisons have experienced in low sales growth rate in the previous financial years in
spite of having highest group sales.

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 Revenue trends of Largest Revenue Trend of Lidl
Supermarket in UK £450.00
£300.00
£60.00 £150.00
£50.00 £0.00
£40.00
£30.00
£20.00
£10.00
£0.00
Tesco Sainsbury Aldi Morrisons

2016-17 (in Billion Pound)

2017-18 (in Billion Pound)
2018-19 (in Billion Pound)

Operating income of Lidl and others firm

Operating profit indicates the income generated by the core businesses and calculated before
deducting the taxes (Garrison, 2014). However, the following table represent the operating
profit of the largest supermarket in UK. The highest operating income generated by the
TESCO in three consecutive years. These operating incomes generated from the combined
sales of the companies. In terms of operating income second positions occupied by the
Sainsbury. However, Lidl is a small retail firms in the supermarket industry. The operating
income of Lidl and other firms significantly differ among them because Lidl generates its
income only from its grocery business area.

Table-7: Operating profit of largest Supermarket of UK

Name of the 2016-17 2017-18 2018-19

supermarket (in Million (in million (in Million
Pound) Pound) Pound)
Tesco £1,280.00 £1,646.00 £2,206.00
Sainsbury £642.00 £518.00 £723.00
Aldi £211.30 £220.90 £182.20
Morrisons £468.00 £458.00 £394.00
Lidl

Operating profit of Largest Supermarket of UK

£2,000.00

£1,000.00

£0.00
) ) )
u nd u nd un
d
Po Po Po
n n n
io io io
ill ill ill
M m M
(in (in (in

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18 -1
17 7- 18
1 6- 20
1 20
20
Tesco Sainsbury Aldi Morrisons
 (Source: Annual report of the companies)

Key findings of the analysis

Based on the analysis of primary and secondary data this study reveals the followings.

 UK supermarket industry is composed with many largest firms having a steady

operating income in their core business areas.
 In terms of the market share the maximum market share is holding by the few
companies including TESCO, Sainsbury, Aldi, and Morrisons, and Lidl etc.
 Lidl is a relatively small firm generating income mainly from the operations of
grocery businesses.
 The percentage of sales growth of Lidl is high among the all companies of
supermarket industry.
 The sales growth of Lidl is more than 13 percent in last financial years whereas the
largest firm TESCO have achieved only 9 percent sales growth.
 The direct customer survey enables the study to explore the reason behind the current
success and growth of Lidl.
 The majority of the customers of Lidl think that Lidl offer wide range of branded
products with most affordable prices.
 In addition to, Customers also believe that, Shopping from Lidl is more convenient as
it offers wide physical space and comfortable shopping experience to its customers.

Conclusion and recommendations

The supermarket industry is largest and consistently growing industry representing almost
2.5% annual growth rate (Cunha, 2019). However, the intensity of competition among the
industry is gradually become intensifying as there are many new firms entering into the
industry. The success of firms not only depends on the financial capabilities of the firm but
also on some other factors including customer services, wide variety of branded products, and
more convenient price etc. this study would be an effective one for those firms who are

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thinking to enter into the supermarket industry in UK because this study provided important
insights of supermarket industry both from the customer perspective and from the financial
perspective.

References:

1. Baines, P., Fill, C., Rosengren, S. & Antonetti, P. 2017. Fundamentals Of Marketing,
Oxford University Press.
2. Cunha, E. 2019. Aldi Sales Grow In 2018 But Profit Falls; To Open 100 New Uk
Stores [Online].
Available:https://www.morningstar.co.uk/uk/news/an_1568641012727103500/aldi-
sales-grow-in-2018-but-profit-falls;-to-open-100-new-uk-stores.aspx [accessed 23
april 2020].
3. Garrison, R. (2014). Managerial Accounting, Mcgraw-Hill Higher Education.
4. Sainsbury (2020). Annual Report And Financial Statements 2019. [Online].
Available: https://www.about.sainsburys.co.uk/investors/annual-report-2019
5. www.statista.com. (2020). Market Share Of Grocery Stores In Great Britain From
January 2015 To January 2020 [Online]. Kantar Worldpanel. Available:
https://www.statista.com/statistics/280208/grocery-market-share-in-the-united-
kingdom-uk/ [Accessed 23 April 2020].

6. Tesco Plc (2020). Annual Report And Financial Statement 2019. [Online]. Available:
https://www.tescoplc.com/investors/reports-results-and-presentations/annual-report-
2019/

7. Wm Morrisons Supermarket Plc (2020). Annual Report And Financial Statement

2018/19. [Online]. Available:
https://www.morrisons-corporate.com/investor-centre/annual-report/

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Presentation

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Appendices
Questionnaire
Dear sir/madam
We are going to conduct a marketing research on Lidl supermarket. Please spare a few
minutes to answer the following questions. Your valuable response can make significant
contribution in this study. Any information provided will be considered as strictly
confidential, and only used for the aim of this research.
Section A: Respondents profile: [Please put a tick (√) mark on the appropriate information]
1. Name of the respondents:
2. Age:
i. Less than 20 years
ii. 21-25
iii. 26-30
iv. 31-35
v. 36 and above
3. Gender:
i. Male
ii. Female
4. Level of Education:
i. Elementary school
ii. High school
iii. Undergraduate
iv. Graduate
5. Average monthly spending
i. Below 250 pounds
ii. 250 pounds to 350 pounds
iii. 356 pounds to 450 Pounds
iv. 456 Pounds to 550 Pounds
v. 556 pounds to 650 pounds
vi. Above 650 Pounds
6. Monthly income of the respondents
i. Below 500 Pound
ii. 501 Pound to 1000 Pound
iii. 1001 Pound to 1500 Pound
iv. 1501 Pound to 2000 Pound
v. Above 2000 Pound

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Section B: Factors that attract customers to shop in Lidl

1 I prefer to shop from Lidl because it is located in my convenient location. Ye No

s
2 I prefer Lidl because of their pricing Ye No
s
3 I used to shop from Lidl because it offers more discounts compared to Ye No
other supermarket s
4 I prefer Lidl because it is more convenient to shop from Lidl Ye No
s
5 The current sales volume attracts me to shop from Lidl Ye No
s
6 I prefer Lidl because it offer wide range of Products Ye No
s

Section C: Customers preferences to Lidl

1 Do You prefer Lidl in terms of the product variety it offers? Ye No

s
2 Do you prefer Lidl in terms of the branded products it offer? Ye No
s
3 Do you prefer Lidl in terms of the online sales it makes? Ye No
s
4 Do you prefer Lidl in terms of the physical ambience and space available Ye No
in the shop? s

Secondary Data

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Market share of Supermarket Industry in UK

Revenue and operating profit of TESCO (2018-19)

Revenue and Operating profit of Sainsbury (2018-19)

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Revenue and operating profit of Morrisons (2018-19, 2017-18, 2016-17)

https://www.statista.com/statistics/300656/grocery-market-share-in-great-britain-year-on-year-
comparison/

https://www.kantarworldpanel.com/en/grocery-market-share/great-britain/snapshot/
12.07.20/14.06.20

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https://www.nhh.no/en/research-centres/food/food-news/2019/september/asda-profit--sales-rise-
despite-failed-merger/

https://www.retaileconomics.co.uk/library-retail-stats-and-facts

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