Supermarket’s business models on a ‘knife edge’, research reveals

Supermarkets’ business models are surprisingly fragile and on “knife edge”, according to a new report from the Food Research Collaboration.

The research, based on Professor Lisa Jack’s investigation on how “tiny and heavily protected” supermarket business models have barely kept the system afloat, has reported that consumers have benefitted from endless cheap food.

However, the system has been left with a balancing act that could easily topple.

The report, The Secrets of Supermarketing: A model balanced on a knife edge from the University of Portsmouth, explained that stores face the costs of running their businesses (stock, IT systems, staff etc.) but need to keep prices down to remain attractive to customers.

READ MORE: Ocado chief executive sceptical about long term profitability of rapid grocery delivery companies

Hence, supermarkets have kept prices low by enticing customers to purchase additional items, bargaining with suppliers as well as charging fees for marketing and selling their suppliers’ products.

In short, Jack has argued the supermarket model of low prices, wide choices, expert marketing, and slim margins – is finely balanced and unsustainable.

As a result, the food system has been characterised by over-purchasing, over-eating, over-production and food waste. 

“Supermarkets have been fantastically successful by selling what are called ‘bundles of convenience’ to shoppers – low prices, convenience and even entertainment,” Jack said. 

“The purpose of my research is not to bash the supermarkets. But it does raise important questions about how such a finely balanced model can make the big changes that may be necessary – and are often demanded by campaigners – to achieve a more sustainable food system.” 

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1 Comment. Leave new

  • Large supermarkets will also become unviable and disappear with the growth of home delivery. My weekly shop in store is heavily impacted now by the home delivery that is leaving shelves empty. My only recourse to get what I want is to do home delivery also myself.

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