No wonder Sainsbury's is upset that Tesco claims to be 8% cheaper than rivals. Grocery outlets have a hard time establishing the trade-off between margins and customer acquisition, and both firms already offer prices way below the UK average. Many UK customers are willing to pay more than Europeans to gain convenience or better quality products, with margins in the country at 28% on average, compared to a European average of 21%.

Average gross margins in European grocery retailing (%)

 
Average margin
Germany
15%
Sweden
19%
France
25%
UK
28%
D A T A M O N I T O R
Source: Datamonitor, 2001: "Future Innovations in Personal Care"

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