Tesco.com - Competition Commission

Market Definition

There is a single product market that operates nationally

We believe that the current Competition Commission inquiry is an opportunity to re-examine the relevant market in its entirety. In past inquiries the Competition Commission has treated primary, secondary and convenience shopping as separate product markets, largely as it was constrained by its terms of reference in different inquiries to do so. We have always believed that these distinctions are inconsistent with the diffuse and mobile consumer demand for groceries that exists. In our view:

• the product market is for grocery retailing as a whole; and

• the geographic market is national.

In today's grocery market there is a high degree of overlap between the different types of shopping trips that consumers make, and the different types of shop they use. Customers today use a wide range of stores. They do larger shops at smaller stores and smaller shops at larger stores, and individual stores cannot discriminate between different types of customer and/or shopping trip. Retailers who attempt to serve a wide range of customers therefore face competitive pressure from a wide range of rivals, all of whom compete in a single grocery retailing market.

The grocery retail market is a national geographic market, rather than a huge number of individual local markets. This is because:

1. brand competition works essentially at a national level and is a key part of the competitive process. For example, Tesco publishes its national prices on the internet alongside those of its key rivals. These apply to Tesco supermarkets across the country. Additionally other parts of the offer, such as range and services, are consistent across the country. What this effectively means is that Tesco stores have the same customer appeal all over the country. A Tesco store in Stevenage is more similar to a Tesco store in Swansea than an Asda store in either location;

2. b) a wide choice is available to most consumers and because many are mobile and choose where they shop, retailers in one geographic area can not get out of line with retailers in another as virtually all the catchments overlap, connecting shops in Penzance with those in Penrith. For example if a retailer in Penzance has a great offer customers will travel to his store, and so other retailers might try to match this offer in order to keep customers. Subsequently more retailers may also follow suit and the impact of this original great offer will soon be felt in Penrith.

What other people are saying about market definition:

"SGF contends that whether superstore or convenience store, we are all part of the same market on the basis that we are selling the same or similar products and services and that the same consumers frequent, or could frequent, our stores" – The Scottish Grocers Federation

"The RSA believes that there is but one 'grocery' market..." – The Rural Shops Alliance

"However the market is defined at the retail level, it is patently one market on the buying front" – The Federation of Wholesale Distributors

"The superstore and the grocery store market are still considered by the OFT to be two separate markets. This is highly controversial with trade associations and others who represent both independent and symbol convenience stores." – Federation of Small Businesses

"The scale of your inquiry remit we suggest should cover the aspect of one unified market place, encompassing multiple grocery stores and convenience stores rather than its present consideration of separate markets." – National Federation of Retail Newsagents