Recession will not spell the end of the UK High Street as we know it, says KPMG/Synovate Retail Think Tank
3 February 2009
Big retailers will continue to grow but new constraints will ensure niche players maintain their place
UNITED KINGDOM — Despite tough trading conditions and a number of insolvencies in the retail sector, the High Street is not likely to become dominated by a small number of very large retailers, a new report from the KPMG / Synovate Retail Think Tank (RTT) has found.
In its latest white paper, the RTT debated the question 'are there limits to the growth of major retailers or will these companies just continue to get bigger?'
Amidst reports that 440 retailers are set to fail this year¹, 100,000 jobs could be lost in the sector throughout 2009² and, according to the BRC-KPMG Retail Sales Monitor, Christmas trading in 2008 was the worst since the research began 14 years ago, there is speculation that the sector could become increasingly concentrated with only the largest, most powerful retailers remaining
The RTT said: "Contrary to popular belief, we do not predict that the UK's shopping centres and High Streets will become dominated by a small group of very large retailers in the future. Yes, trading conditions are exceptionally tough at the moment, with a number of big name insolvencies both before and after Christmas, and this undoubtedly has an impact in terms of competition. Having examined the effects of downturns in the 1970s and 1990s we also recognise that recessions have traditionally acted as a catalyst for greater market concentration. However, the RTT still firmly believes there will always be constraints which prevent the sector becoming dominated by a very small group of big companies."
Highlighting the ascendancy of the world's biggest retailers, which include supermarket groups Wal-Mart, Carrefour and Tesco (please see the full White Paper for statistics), the group agreed that successful retail businesses like these have continued to grow by developing ways of overcoming traditional constraints to growth.
This means improving infrastructure and internal management, overcoming market saturation through the creation of alternative formats, seeking overseas opportunities due to restrictions imposed by home governments and turning cultural and regional differences into opportunities for innovation.
However, despite the impressive expansion of the world's top retailers and their efforts to overcome the traditional constraints to growth, the RTT found that as retailers get bigger, they can lose their focus and cohesion. Having the right people to implement strong leadership is crucial in avoiding this situation. Leadership and quality of service as a retailer grows can be particularly difficult to maintain and these form part of a new set of constraints which bigger companies now face and need to overcome to continue their growth.
The RTT concluded: "There is still a long way to go to before a truly global market exists in retail. Although the RTT agrees that this process has already started, and the current downturn will act as a catalyst in accelerating this, we predict it could take 20 years to fully develop. However, even then no single retailer can be 'all things to all people' meaning that retail remains varied and competitive and there will continue to be a role for niche players despite the continued, exceptional growth of the very biggest companies."
A full version of the RTT white paper, entitled 'Are there limits to the growth of major retailers or will these companies just continue to get bigger? is available at www.retailthinktank.com or on request.
Footnotes:
¹Experian
²Centre for Economics & Business Research
The intellectual property within the RTT is jointly owned by KPMG and Synovate.
Contact(s) for this press release
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Theo Chalmers
Managing Director, Verve Public Relations |
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Park House, 8 Grove Ash |
Tel. +44 1908 275 271 |
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Rachael Halliday
PR manager, KPMG |
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Tel. +0117 905 474 |
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