Tesco and Sainsbury are busy trumpeting the success of their respective loyalty card schemes. In fact, their fierce rivalry goes much further. Both know that the only sure way to consumer loyalty is to supply the full range of consumers' needs. So both are broadening their offerings and boosting their online presence.

The UK grocery retailing landscape is set to shift up a gear as competition spreads between Tesco and Sainsbury’s, the nation's number one and two supermarket chains. As well as vying over the success of their respective loyalty card schemes, the two retailers are also rethinking their store format strategy.

Both companies have invested heavily in loyalty card schemes and are keen to outdo each other. Sainsbury’s is currently claiming to have 11.1 million registered Nectar users, more than the 10 million Tesco recently boasted for its loyalty scheme. Tesco have responded, however, with a claim that they actually have 13 million users in 10 million households. Either way, a significant proportion of the population seems to have pledged loyalty to one or the other of the retailers.

Except, of course, people have pledged no such thing. Both Sainsbury’s and Tesco are aware of this, which is why they are both expanding their retail positioning to attract more consumers. Sainsbury’s have recently begun to expand into more non-food areas, while Tesco has purchased T&S, the convenience store company. By offering a wider variety of store formats, Tesco hopes to meet the need for urgent or spur of the moment purchases, regular household supplies and occasional extraordinary purchases.

Both companies also want to make more of their online services. Tesco has led the way in online shopping, while Sainsbury’s has recently shown 90% growth in its Internet based home delivery business.

Many retail industry experts now believe that the future lies in home delivery – with enough demand, it becomes cheaper than operating a store, has greater appeal to consumers and can be expanded to cover a wide range of services. In the end, the store format of the future may be no store at all.

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