Recession will not spell the end of the UK High Street as we know it, says KPMG/Synovate Retail Think Tank

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.

Notes to editors

Footnotes:

¹Experian

²Centre for Economics & Business Research

First mentions of the Retail Think Tank should be as follows: the KPMG /Synovate Retail Think Tank. The abbreviations Retail Think Tank and RTT are acceptable thereafter.

The RTT was founded by KPMG and Synovate (formerly SPSL) in February 2006. It now meets quarterly to provide authoritative ’thought leadership’ on matters affecting the retail industry. All outputs are consensual and arrived at by simple majority vote and moderated discussion. Quotes are individually credited.

The Retail Think Tank has been created because it is widely accepted that there are so many mixed messages from different data sources that it is difficult to establish with any certainty the true health and status of the sector. The aim of the RTT is to provide the authoritative, credible and most trusted window on what is really happening in retail and to develop thought leadership on the key areas influencing the future of retailing in the UK.

Its executive members have been rigorously selected from non-aligned disciplines to highlight issues, propose solutions, learn from the past, signpost the road ahead and put retail into its rightful context within the British social / economic matrix.

Members are:
Nick Bubb, Pali International
Prof. John Dawson, Universities of Edinburgh and Stirling
Dr. Tim Denison, Synovate
Helen Dickinson, KPMG
Richard Lowe, Barclays Retail & Wholesale Sectors
Vicky Redwood, Capital Economics
Mark Teale, CB Richard Ellis

The intellectual property within the RTT is jointly owned by KPMG and Synovate.

Synovate, the market research arm of Aegis Group plc, generates consumer insights that drive competitive marketing solutions. The network provides clients with cohesive global support and a comprehensive suite of research solutions. Synovate employs over 6,000 staff across 62 countries.

For more information on Synovate visit www.synovate.com.