Sainsbury's woes should be a warning to Tesco After two decades of relentless growth for Tesco, which has established it as the biggest retailer in the UK and one of the biggest in the world, the company's crown appears to be slipping. Retail dynasties in the UK have come to an end before. Indeed, the problems facing Tesco today could prove to be a repeat of the decline of J Sainsbury in the early 1990s, when it lost its position as the market leader and king of food retailing to Tesco. In 1996, Sainsbury's reported its first fall in profits for 22 years, just as Tesco reported its first fall in two decades earlier this year. The annual report from Sainsbury's for that year shows striking similarities to the Tesco of 2013. It describes how the company is trying to modernise and improve customer service through its "Customer First" plan. Sainsbury's said it was investing in refurbishing 97 stores, introducing new own-brand ranges in chilled and frozen food, and hiring 5,000 extra staff at a cost of £30m. The retailer also said it was introducing new services at its stores to attract customers, such as pharmacies and petrol stations. By this time, Sainsbury's had already warned that its margins had fallen and announced a slowdown in store openings, which led to a writedown in the value of its land. David Sainsbury, the chairman and chief executive of Sainsbury's, said in the annual report: "This is not a satisfactory financial performance, but we have taken decisive action to enhance our competitive position in the future." Tesco, through its "Building a Better Tesco" plan, is now also investing in modernising its stores, hiring extra staff and revamping its own-brand ranges. It has also seen its margins fall from more than 6pc to 5.2pc. Sainsbury's response in the 1990s failed. It continued to lose market share for years after slipping behind Tesco, eventually falling to third in the UK behind Asda in 2003. It was not until Justin King arrived as chief executive in 2004 - when Sainsbury's reported its first loss in 135 years - that sales began to recover. The woes of Sainsbury's are a warning about how difficult it can be to shift momentum in the retail industry. Tesco has more than 3,000 hypermarkets, supermarkets and convenience stores in the UK, so it could take years for Clarke to change Tesco stores and shed the perception of some customers that it is a heartless growth machine. The supermarket battle of the 1990s also suggests that retrenchment is not necessarily the best policy. King has said that Sainsbury's problems were compounded by holding back on expansion in the 1990s, when Tesco was aggressively buying out-of-town land across the country, giving it a foothold in local areas that it has never relinquished. A slowing down of Tesco's store development programme is arguably even more profound, because a key reason for its success under Sir Terry Leahy was the ability of his property team to snap up key sites, develop them successfully into supermarkets, and then raise new funds for expansion through sale-and-lease-back deals. Tesco arguably has no choice but to slow down, because it has reached every corner of the UK and the economy is flatlining. However, other retailers are still expanding. Sainsbury's says that 22pc of the UK population still does not live within 15 minutes of one of its stores, while Tesco now also faces fierce competition from Waitrose, Aldi and Lidl. Could Tesco's dominance of the UK market, in which its share is almost double the 16.8pc of Sainsbury's, just prove to be an anomaly that disappears as rivals catch up with its geographical expansion? After all, are Tesco stores really twice as good as Sainsbury's? Sainsbury's is certainly outperforming Tesco at the moment, and has done since the onset of recession in the UK. Next week, the City expects the retailer to report like-for-like growth in the UK of as much as 3.5pc in the past three months, compared with a 1pc drop for Tesco. However, while there may be similarities to Sainsbury's in the 1990s, Tesco is well placed to retain its retail crown. Firstly, it is much more dominant today than Sainsbury's was in the 1990s. According to Kantar, Tesco's market share is 30.2pc, while Sainsbury's is 16.8pc. Tesco's UK sales were £43bn last year - a different league to Sainsbury's £25.6bn. At the peak of its powers in 1992, Sainsbury's had a market share of just 20.5pc, and Tesco was not far behind at 17.4pc. Sainsbury's is not eating into Tesco's lead at any great pace. Over the past year, Sainsbury's market share, despite its impressive performance, rose just 0.3 percentage points from 16.5pc. Upmarket supermarket Waitrose and discounters Aldi and Lidl are growing market share at a faster pace. Secondly, Tesco looks well placed in the fastest-growing segments of the UK grocery market - convenience stores and the internet. There are already more than 1,930 Tesco convenience stores in the UK, while Tesco's online sales rose 13pc to more than £3bn last year. It is bigger than its rivals in both these markets, and investing more. Clarke has said the retailer is to spend $750m (£485m) on technology this year, three times more than in 2010. Tesco even has an app development centre in London's version of Silicon Valley, Shoreditch. In terms of revamping Tesco stores, Clarke has recognised that the retailer lost touch with its customers and has bitten the bullet. Rather than fiddle around the edges as Sainsbury's did in the 1990s, Clarke has pumped £1bn into improving the UK business and overseen a kitchen-sink job in Tesco's most recent annual results that saw worldwide post-tax profits fall from £2.8bn to £120m. Some City analysts believe Clarke needs to go even further to halt Tesco's decline, however, as Philip Dorgan at Panmure Gordon, said: "Remember that the darkest hour is just before dawn." For those who doubt whether Tesco can retain its position in the UK and abroad, there is one final point. Its largest shareholder is Warren Buffett's Berkshire Hathaway. The Sage of Omaha does not get much wrong.