A new piece of research underlines the sheer scale of the challenge facing beleaguered Tesco boss Philip Clarke as he attempts to steer the retail giant back on track.
In the week Tesco posted a 6% fall in group trading profits, new data compiled by location strategy experts CACI revealed a sharp fall in the number of postcodes in which it holds a dominant market share.
While it still holds the lead in 69 of the UK’s 121 postcodes, this is down more than a fifth on 2008, when it led in 87 - and in some of those 69 areas, the retailer is at risk of being overtaken.
“Competition behind them is intensifying so this [figure] is increasingly under threat,” said CACI principal consultant Louise Etherden. “In 21 postal areas, the next retailer is within 5% so could easily take the lead.”
The number of postcodes dominated by the big four
Announcing Tesco’s full-year results on Wednesday, Clarke admitted that the retailer “faced a weaker and increasingly competitive market” in the second half of its financial year, with particular pressure coming from the discounters, who have stepped up their store opening programmes.
The growing geographic spread of the discounters was also reflected in CACI’s research, with Aldi climbing to fourth place in markets such as Hull, Luton, Oldham and Motherwell, and third in Llandrindod Wells, and Lidl also making strong headway, ranking fifth in areas such as Halifax, Truro, Exeter and Dundee.
“The research shows that Aldi and Lidl are still quite regional businesses and in the South East there are areas where they are clearly under-penetrated, but given that the retailers have both stated that they have big expansion plans for this area in the future, Tesco’s dominance in the South East is clearly under threat,” said Bryan Roberts, director of retail insights at Kantar Retail.
The research also reflects the full extent of Morrisons’ woes, with the retailer only having market leadership in two postal areas in the UK. It is now even lagging behind Asda in its hometown of Bradford.
“Morrisons is losing share in the North of England as it’s seeing like-for-like declines of 5% to 6% each quarter,” said David Gray, retail analyst at Planet Retail. “The company is particularly exposed to the discounters in the North as they try to compete on price.”
Asda continues to perform strongly in the North. Most of the 24 postal areas in which it is number one are Northern, although it is still relatively weak in the South of England where in 19 postal areas it only holds fifth or sixth place.
Outside the discounters, the biggest wins were registered by Sainsbury’s, which appears to be gaining ground in the North of England, with a commanding share in Crewe, Huddersfield and Derby. The retailer still has very low market share throughout much of Scotland and Wales, though, in fifth spot or lower in 14 postal areas.