The Food Retail Industry’s Structure and Analysis

Introduction of the Industry

The food retail industry, also known as the supermarket industry, is a business segment that traces back to the small family-owned businesses to international supermarket chains like Tasco and Walmart. The notion of the retail and foodservice sector encompasses a variety of different services related to the selling commodities related to food. Thus, the food retail industry concerns both foods stores, where the products are sold to be later consumed outside the establishments, and food establishments that presuppose preparing and selling food and drinks for service (Retail and food service sector and consumers, n.d.). Hence, the food retail industry is a highly relevant industry in both local and international markets, as it provides consumers with vital resources.

Structure and Market Concentration

The retail market organizational structure may be outlined as follows:

The first and the most important aspect of the retail food industry is the top management of an establishment, including the chairman, the board of directors, and the CEO. The chairman and the board of directors are the major stakeholders in coordinating investments and the organization’s functioning. The CEOs, for their part, are responsible for coordinating the communication between the board of directors and the operational staff of the organization in order to adjust the organization’s vision and objectives.

The operational staff on an organization entails category management, marketing, store operations, finance and control, warehouse and distribution, and e-commerce. Thus, the notion of category management stands for the department responsible for procurement of raw goods from wholesalers or the distributors of goods from various manufacturers. Over the past years, supply chain management has been focused on sustainability, creating two primary scenarios for food supply. The first scenario applies to the retail food stores, and it presupposes that the food producer, either directly or through a trader, sells raw goods to food processors who then connect the product with the consumer through distributors, wholesalers, and retailers (Ojo et al., 2018). The second scenario that concerns the food establishment segment connects food producers with the consumer through catering services. For this reason, category management plays the role of a retailer and a catering service management.

The next category within the structure, warehouse, and distribution, stands for storing and delivering goods to the retail spaces. The segment of store operations, which includes people management, inventory, pricing, and promotion, is arguably one of the most significant aspects of the organizational structure, as the employees working on the establishment premises and communicating with the consumers are responsible for securing all the initiatives, values, and strategies outlined by the back office. Finally, the marketing and e-commerce teams are responsible for the development of communications and the availability of the products introduced by a company. For example, Tesco, one of the leading companies in the UK food retail market, once became one of the leading food retailers in the country by implementing a Clubcard marketing strategy. Even if now, most food establishments have loyalty systems, customers still tend to go to Tesco because of its recognition.

The e-commerce sector, although not present in all organizational systems, has become an asset in terms of the COVID-19 pandemic. According to Panzone et al. (2021), the COVID-19 outbreak has resulted in various challenges for food retail, especially as far as small businesses are concerned. However, the discovery of e-commerce and product delivery services has helped hundreds of industry businesses to stay afloat. However, such innovation also contributed to the emergence of delivery services as a part of organizational structure, with either hiring delivery employees or negotiating with delivery services such as Uber Eats.

However, while, in many cases, the organizational structure of a retail food business presupposes the existence of various functioning departments, there are currently more than 45,000 convenience stores across the US that employ nearly half a million UK residents (Rybaczewska et al., 2021). In the case of these stores, the functionality of a retail unit is concentrated in the hands of a dozen of employees who tend to manage storage, store operations, procurement, and marketing.

While it may seem a liability, the convenience store segment in the UK is highly popular with the customers due to the convenience of shopping and the customer-oriented approach of a small business (Rybaczewska et al., 2021). For this reason, there is currently no external threat that small food retail businesses could be substituted by larger companies. Still, as far as the profitability is concerned, the majority of grocery market shares are concentrated in large food retail corporations like Tesco (28.2%) and Sainsbury’s (16.4%) (Market share of grocery stores in Great Britain, 2021). All the other representatives of the industry have a considerably smaller share.

Substitutability

When it comes to the substitution threats for such big corporations, the physical stores should for the risk of being replaced by online-only personalized grocery delivery services, as people’s purchasing patterns have changed drastically after the pandemic. Moreover, if previously, people were interested in buying goods for a lower price, the modern context of sustainability theory implies that consumers are preoccupied with the specifics of a supply chain of the product, including manufacturer, employment conditions, and carbon footprint of the suppliers (Antonides, 2017). For this reason, for a retail food company to become successful and profitable, one is to make sure that both the raw materials and the supply chain are sustainable. The importance of price, although still relevant for some populations, has now become of minor concern for modern adult generations. As a result, big corporations that may struggle with tracking sustainability along the supply chain are at risk of being abandoned in favor of smaller organic food retail establishments.

Reference List

Antonides, G. (2017) ‘Sustainable consumer behaviour: A collection of empirical studies’, Sustainability, 9(10).

MARTEC International (2017). Retail structure course. Web.

Ojo, O.O., Shah, S., Coutroubis, A., Jiménez, M.T. and Ocana, Y.M. (2018) ‘Potential impact of industry 4.0 in sustainable food supply chain environment’. In 2018 IEEE international conference on technology management, operations and decisions (ICTMOD) (pp. 172-177). IEEE.

Panzone, L.A., Larcom, S. and She, P.W. (2021) ‘Estimating the impact of the COVID-19 shock on UK food retailers and the restaurant sector’, Global Food Security, 28.

Rybaczewska, M., Sułkowski, Ł., and Bilan, Y. (2021) ‘Covid-19 pandemic and independent convenience stores in the United Kingdom’, Engineering Economics, 32(3), pp.258-265.