Welcome to the the Ivey HBA Retail Marketing Management blog. Retail marketing is an exciting, dynamic, important, and very visible aspect of the overall field of marketing. Throughout the year, students will be posting comments regarding contemporary retailing issues. Although this is intended to be used by Bus 4411 students, industry marketing professionals are also invited to join in if they like.

Monday, March 16, 2009

Are the UK’s largest retailers entering an “eco-war”?

Retailers in the UK are adopting more sustainable practices. In October 2008 Asda (the UK subsidiary Walmart) opened the UK’s first “eco superstore” in Bootle, Liverpool. The store is 50% more energy efficient than typical Asda stores.[1] Tesco, the UK’s largest retailer, responded earlier this year by opening its first “eco store” in Cheetham Hill, Manchester and has committed to halving CO2 emissions from stores by 2020, relative to 2006, by converting 2,115 of its stores into “eco-stores”[2].

Tesco’s eco store Cheetham Hill, Manchester

From October to the end of 2008, Asda’s eco superstore provided it with a competitive advantage, however Tesco closed this gap when opened its first eco store to protect its position as the biggest UK retailer. By not only matching, but improving on Asda’s efforts, Tesco may be provoking an eco-war. If both retailers constantly adopt progressively, more ecological policies, neither retailer will gain an advantage.

But what, if anything, do Tesco and Asda stand to gain from this? Their customers’ experience may slightly improve, stores lit naturally, rather than with fluorescent lights may be more pleasant and some individuals may feel good about supporting a more environmentally friendly store. Overall the retailers’ NVPs will change, if at all, insignificantly. The new eco-stores are not an additional retail format but an adaptation of current formats; therefore it seems the new stores will not attract a new segment of customers.

Energy efficient stores should have lower running costs, however as ecologically friendly materials are not yet widely used in UK construction, the stores had high initial outlay costs, Asda’s Bootle store cost £27million.[3]

The extent of these retailers’ environmentally friendliness must not be overstated. Although it is truly commendable that these stores have used sustainable energy and construction resources, it would be expected that the transportation and distribution of the goods sold would have a higher energy consumption (and therefore more detrimental effects on the environment) than the stores themselves. Barring this in mind, perhaps the retailers should consider “greening” their distribution systems and stocking more local produce before they go as far as to label these outlets “eco-stores”.

The Co-Operative Group, another major player in the UK retail industry has sourced 99% of all its energy from renewable sources since 2007, farms 70,000 acres of English farmland and has twice been recognised as the most ethical and the greenest brand in the UK. [4] This makes Tesco’s and Asda’s efforts seem comparatively poor and merely PR stunts.

If an eco-war breaks out, it will be interesting to see if the UK’s other large supermarket chains commence join and if such a battle to result in the retailers matching the standards of Co-Operative Group. My guess is that it will be dependent on their degree of commitment to the environment, Tesco and Asda certainly have the bargaining power relative to manufacturers in the UK, will they leverage this to make the entire distribution chain adopt more ecologically friendly practises? Also if predicted cost savings are not realised will this retailers to retreat?


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