Tesco must deliver an improved performance in all markets, not just the UK, if it is to maintain its position as the second largest retailer in Europe by 2018, according to new research by Kantar Retail.
Its retail analysts advise Tesco to focus on price, quality and service in other parts of Europe if it is to compete on a European and global stage. Despite the retailer’s recent £1bn investment in the UK, which is expected to give it a far improved performance in the next five years, its current struggles with consumer confidence in central and Eastern Europe could hamper growth, researchers said.
The future looks brighter for both Sainsbury’s and Asda – with both retailers expected to deliver good performances across multi-channel platforms with further investments planned over the next five years, said Kantar Retail. And, by 2018, Amazon is likely to become the second largest global retailer.
These predictions are part of a new European ranking, produced by leading retail analysts Kantar Retail in conjunction with its annual Top 50 Global Retailer listing. It reveals the current movers and shakers in retail and forecasts the fortunes of UK retailers in the next five years.
Tesco’s 2018 European sales figures are estimated at £78.5bn – an increase of £14.8bn – based on improvements the retailer is making. Refurbished stores, a focus on growth channels such as online and convenience shopping and its Price Promise are helping boost Tesco’s recovery in the UK.
Sainsbury’s and Asda have strengths in different areas but both are estimated to see an increase in performance.
- Asda has progressed more online with services such as Click & Collect, whereas Sainsbury’s has a much stronger convenience portfolio
- In terms of shopper perception (as measured through BrandZ scores), while ASDA scores better on price, Sainsbury’s is perceived better on fresh produce and own label ranges.
Asda recently invested £700m into developing stores, its online capabilities and supply chain while Sainsbury’s has invested in a new Thameside distribution centre to aid convenience stores in the South East.
Sainsbury’s is anticipated to slip one place from 10 to 11 by 2018 despite sales expected to show an increase of £8.3bn, while Morrisons could slide from 14 to 17, with an increase in sales of around £5bn. These slides will be a result of growing market share from other European retailers, such as Russian companies X5 and Magnit, which are both planning large expansions in their home market over the next five years.
The biggest mover in the ranking is Amazon, which is set to climb 14 places to number nine by 2018, with an anticipated Compounded Annual Growth Rate (CAGR) of 18.4%. The online retailer is also expected to become the second largest global retailer by 2018 and its projected success is based on a wider assortment with the addition of new categories, shopper loyalty through membership programmes and its constant innovation – including partnering with bricks and mortar stores such as the Cooperative to provide in-store collection.
Himanshu Pal, Kantar Retail’s director, retail insights, said: “This top 20 European ranking shows real opportunity for UK retailers if they continue to invest in the right areas. For example there are already visible signs of improvement in Tesco stores with regards to quality and service, which are likely to get better with the integration of Euphorium Bakery, Harris + Hoole cafes, and Giraffe restaurants.
“But to regain its dominant position on the global, as well as the European retailing landscape, Tesco will have to ensure that all its markets deliver growth. To reinvigorate growth in CEE, Tesco will have to further improve its real value proposition – price, quality and aervice.”
European Top-20 Retailers
European Top-20 Retailers
A top 50 global retailer listing is also available.