The threat of a price war among British supermarkets has receded but competition remains intense on service so that operating margins could stay under pressure, research group Verdict said in a report published today.
The report, "Verdict on Grocers and Supermarkets," said that an upturn in consumer spending and the resurgence of Sainsbury, currently second to Tesco in market share, had helped to dampen the threat of a price war.
"However, competition in the sector is no less intense and so, whether the focus is on service or on price, the net effect will be that operating margins will remain under pressure," Verdict said.
It said supermarkets were finding it harder to capture customers from rivals, which placed "a premium on keeping existing customers happy and selling more goods and/or services to these loyal shoppers".
As the overall market expanded in 1997 by 5.2 per cent to nearly £93 billion sterling, Tesco increased its market share to 16.8 percent, ahead of Sainsbury on 13.3 per cent.
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