A new report from the KPMG/Synovate Retail Think Tank (RTT) has found that despite tough trading conditions, the High Street is not likely to become dominated by a few large retailers as many have feared.
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?’
Reports show 440 retailers are set to fail this year, 100,000 jobs could be lost in the sector over the year and according to the BRC-KPMG Retail Sales Monitor, Christmas 2008 was the worst since research began 14 years ago. All this has sparked 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 rise of the world’s biggest retailers, including supermarket groups Wal-Mart, Carrefour and Tesco, the group agreed successful retail businesses have continued to grow by developing ways of overcoming constraints to growth.
This results in improving infrastructure and internal management, overcoming market saturation through the creation of alternative formats, seeking overseas opportunities and turning cultural and regional differences into opportunities for innovation.
Despite the impressive expansion of the top retailers, however, the RTT found as retailers get bigger, they can lose focus and cohesion and having effective leadership is imperative if this situation is to be avoided.
Leadership and quality of service as a retailer grows can prove difficult to maintain and form part of new constraints bigger companies now face and need to overcome to continue 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.