Future of Retailing in the UK

Countries covered: United Kingdom This report is the result of our extensive market, company and deals research covering the UK retail market. It provides detailed segmentation of historic and forecast retail sales, segmented down to category and channel level; analysis of the leading UK companies in the retail market; and analysis of the key financial deals involving retail players in the UK. “The Future of Retailing in the UK” provides both top-level overview and detailed category-, channel- and company-specific insights into the UK‟s retail industry environment. It is an essential tool for companies active across the UK retail value chain and for new players considering entering the UK‟s retail market.

Additional Information

Key Market Trends

Recession and unemployment: Since the global financial crisis began in September 2007, consumer confidence has declined and substantial pressure has been put on retailers. The lack of confidence can be directly related to the current slowdown, and the associated fear of job losses. This has driven a substantial expected fall in full-year 2009 retail sales.

Lower household costs and recovering confidence: Households in the UK that have remained untouched by the job cuts have seen increased disposable income due to declining interest rates. Mortgage payments in the UK have declined by 25% by mid-2009 over the previous year. The average UK household is spending £200 ($371.0) less per month than in 2008 on essentials, primarily due to lower mortgages, low interest rates, and drop in petrol, electricity and gas prices.

Key Channel Trends

Supermarket dominance: The UK retail market is dominated by generalist retailers - a group which is itself dominated by supermarkets and hypermarkets. The UK's largest supermarket chain, Tesco, is reported to account for one in every seven pounds spent in the country.

Online growth: The UK's online retailing market has been an unequivocal success story, with strong growth expected for 2009 despite overall poor market performance. While online retailing was initially confined to categories such as books and recorded music, with generic products that do not require a tactile experience prior to purchase, improvements in technology have allowed it to extend into more categories with more complex purchasing patterns. Limited discounter presence: European-style hard discount stores have not achieved major scale in the UK. Much of the UK discount environment consists of "pound shops" (dollar-store equivalents) that stock an ever-changing range of very cheap products targeted at very low income consumers.

Key Category Trends

Premiumization in food & groceries: Food & groceries is by far the most important category group. Growth here has been driven in recent years primarily by premiumization: food volumes sold in the UK are not showing a substantial rise, but the price per unit of food has been rising as food manufacturers and retailers seek to persuade consumers to upgrade to higher-quality, more expensive products. Commodity price inflation in 2007-2008 also boosted value sales in the food market, since demand is relatively inelastic.

Competitive apparel, accessories and luxury goods market: There has been an explosive growth in discount and mid-price clothes retailing: specialist retailers such as Primark and supermarkets such as Asda have created ranges of fair-quality, relatively fashionable clothing at very low price-points while retailers like Zara have launched fashionable clothes at medium price points.

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