The major supermarket organisations of today have enormous influence on the market as а result of rigorous and expensive marketing campaigns. For example Sainsbury’s most recent campaign had the help of ‘celebrity chef’ Jamie Oliver and generated а five to one return on advertising costs. The brand loyalty that these organisations have created means that а consumer would be very unlikely to switch to an unknown product unless they were sufficiently dissatisfied with the current products on offer.
As there are already а considerable number of competitors in the retail market (i.e. Wal-Mart, Asda, Waitrose, Aldi) that there isn’t currently room in the market to accommodate for another major competitor; indeed the number of large players is reducing as а result of mergers.
The only way а new entrant could be of any threat to Sainsbury’s would be in the case of а merger/takeover from an unknown company from abroad. This occurred in 2000 when the American giant Walmart took control of Asda. The invasion by the US giant unnerved investors in rival companies. Shares in Wal-Mart slumped nearly 7% to 178p, while Sainsbury fell 5% to 370.5p. Safeway, however, the smallest of the big fourUKsupermarkets, rose nearly 3% to 252p after speculation that it was being courted by US suitors. All in all the managers of Sainsbury’s will be reasonably undaunted by the threat of new entrants into the industry due to the high entry costs, brand loyalty and the power which the major players have over suppliers.