Another reason for intense rivalry between firms in the retail industry is because there are high storage costs and highly perishable products, which cause the stores to sell their goods as soon as possible. Because other stores are attempting to unload at the same time, competition for customers intensifies. Furthermore the low switching costs that customers face mean that firms fight even harder to retain each customer.
One way that the supermarkets have attempted to maintain customer loyalty is through the offers called Sainsbury’s Rewards cards or Wal-Mart Club cards which give savings back to customers for points collected when they shop, which in theory makes customers more loyal to that store. In reality loyalty cards may be seen to be past their ‘shelf-life’ as many shoppers actually own several cards and just present the correct one depending on which shop they are in. The real advantage to stores is not necessarily the ‘loyalty’ element but the data on customers and their spending patterns that the cards provide.
The final point about rivalry is that of takeover. When а takeover deal is finalized it is big news in the retail world because it should mean that the new firm should be able to drive costs down and hence lower prices. This was the concern in the industry when Morrisons took control of Safeway. The process of combining the two companies has not, however proven easy and results have been extremely mixed.