KPMG And RTT Reports Says Recession Will Not Spell The End Of The UK High Street

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

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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 year, 100,000 jobs could be lost in the sector throughout 2009 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

“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,” says RTT. “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.

D.C.

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