PESTEL analysis of the grocery and supermarket (retail) industry
This detailed PESTEL analysis of the grocery and supermarket (retail) industry examines how the industry is affected by macro factors globally, with special references to the USA, the UK, the EU, and Canada. Grocery is one of the leading industries in many countries and a big contributor to the GDP.
Political factors that impact on the grocery and supermarket (retail) industry
Global political stability is essential for the grocery and supermarket industry to thrive. Many of the top retailers such as Tesco, Walmart, Carrefour, Kroger, Sobeys, Lidl, Aldi, and Costco work with both domestic and international suppliers. If there is any problem with the international suppliers, it will have some kind of impact on the retailers.
Political challenges may impact on the grocery and supermarket industry in many different ways. For instance, new regulations after Brexit have affected the costs and increased delays to bring goods to the UK from the EU. It is estimated that approximately 80% of food imports to the UK come from the EU (Walker and Mugudubi, 2021).
Demonstrations against global retailers in many countries are not uncommon. For instance, many people have protested against Amazon in several French towns and cities and accused it of urbanising farmland (Aljazeera, 2021). Similar protests have been seen against some other global retail giants in many countries.
Economic factors that impact on the grocery and supermarket (retail) industry
Economic circumstances impact on the grocery and supermarket industry directly. People with jobs and disposable income are likely to spend more on groceries than those with financial limitations. Likewise, supermarkets cater to the needs of different customers differently. For example, basic and value products are for people with financial limitations, whereas premium products are for those who have no financial worries.
High property rent, local authority fees, and tax rates increase the operating costs of the supermarkets which in turn increase the selling prices of the products. 2020 was a difficult year from many economies; however, things are expected to get better in coming years which is a very good news for the grocery industry.
Social factors that impact on the grocery and supermarket (retail) industry
Exploring social factors is the next stage in the PESTEL analysis of the grocery and supermarket (retail) industry. Consumers have developed online shopping behaviour in the past several years. In response, many retailers have introduced online shopping and home delivery systems. However, once all the restaurants are open (which were closed for global lockdowns in 2020/21), the demand for grocery retailers is likely to go down a bit.
Many retailers in the UK, the USA, and other countries now cater for products that address the needs of people with different ethnic background. In fact, the global ethnic food market is expected to grow rapidly in the next 5 years. Similarly, demand for vegetarian and vegan products is also increasing rapidly offering good opportunities for the retailers to seize.
Grocery retail industry is going to grow in Africa, Middle East, and Asia because of favourable age distribution (Wunsch, 2020). This is also because many people are coming out of poverty. However, the more people become aware of the consequences of sugary products, the less will be the demands affecting a huge number of products sold by the retailers.
Technological factors that impact on the grocery and supermarket (retail) industry
Technology has dramatically changed the ways supermarkets operate. Human-served checkouts have been replaced with automated machines. Most retailers have electronic loyalty cards and inventories have long been computerised. They also use social media to promote their products.
However, one of the challenges for the retailers is the lack of skilled IT staff at physical retail locations. Similarly, loss of data and cyber insecurity can turn out to be challenging as well.
Environmental factors that impact on grocery and supermarket (retail) industry
Operations of the retailers have impact upon the environment. For instance, food packaging is directly responsible for several environmental problems such as pollution, and overcrowded landfills. Likewise, technology and devices used for frozen products consume a lot of energy and emit greenhouse gases. Therefore, retailers need to be in constant pursuits to reduce their impact on the environment.
Legal factors that impact on the grocery and supermarket (retail) industry
Exploring the legal environment is the last component in the PESTEL analysis of the grocery and supermarket (retail) industry. Countries have different rules and regulations which impact on the retailers differently. For instance, retailers must pay at least the minimum wages in the UK. Likewise, the Equality Act 2010 protects people from employment discrimination in the country.
Several retailers were fined in the UK and the US by the relevant authorities for failing to comply with rules concerning waste management, food safety, and selling out of date food. Therefore, the retailers must exercise due care to avoid lawsuits and fines.
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Last update: 26 July 2021
Aljazeera (2021) France: Hundreds protest against Amazon expansion, available at: https://www.aljazeera.com/news/2021/1/30/hundreds-protest-against-amazon-expansion-in-france (accessed 26 July 2021)
Walker, A, and Mugudubi, P. (2021) How is Brexit affecting UK supermarkets and shoppers? available at: https://www.kantar.com/uki/inspiration/retail/the-impact-of-brexit-on-uk-grocery-industry-and-shoppers/ (accessed 26 July 2021).
Wunsch, N. (2020) Sales value of grocery retail worldwide in 2016 and 2021, by region, available at: https://www.statista.com/statistics/754878/grocery-retail-worldwide-sales/ (accessed 09 July 2021)
Author: M Rahman
M Rahman writes extensively online with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.