The future of retail – is it really cut and dried?

Citation

(2002), "The future of retail – is it really cut and dried?", International Journal of Retail & Distribution Management, Vol. 30 No. 3. https://doi.org/10.1108/ijrdm.2002.08930cab.003

The future of retail – is it really cut and dried?

The future of retail – is it really cut and dried?

Grocery multiple retail is entering a period of unprecedented uncertainty in Europe. The course it plots over the next decade will have profound implications for all suppliers, especially food manufacturers. But most commentators are focusing their attention on a narrow range of issues and outcomes, particularly how many – and which – retailers will carve up Europe's grocery retail market between them.

"There are so many variables", explains Claire Smith, analyst with Promar International, the strategic food consultancy. "Recent years have seen a number of high-profile mergers and acquisitions, plus a lot of noise about home-shopping services, all of which have focused attention on issues of consolidation, economies of scale and who holds power in the supply-chain. But the future is far from clear-cut, and in our view too little attention is being paid to the numerous other factors which will actually shape the face of multiple retail – and hence the operating environment for suppliers."

The world of grocery retail is changing fast: but the outcome of the various strategic moves being made by today's major players will not necessarily be as many are projecting. "Some of the predictions made about multiple retail five or ten years hence are rather simplistic", says Claire. "It is not necessarily all good news for the major multiples. Some of the diversification strategies they are pursuing are decidedly risky – and also, in the future, sheer scale may well be more of a disadvantage than an advantage, when it comes to accessing consumer food spend."

While the maturity of the food retail sector is essentially driving the investment in new technologies and retailer consolidation, Promar argues that the underlying factors deserve more consideration. Claire highlights the rise of the empowered consumer, the emasculation of the mass market, competition from non-retail channels, and revolution in supply-chain processes as key elements of change. "But though all of these factors, and more, have important implications for the shape, size, cost structures and profitability of multiple retail, the key question – which is very difficult to answer at this stage – is how precisely will they act together?"

The uncertainty associated with two other key variables also means that planning on the basis of a single projected future is doomed to failure. No one can tell, at this point, how widespread interactive technologies (B2B, B2C, T2T, etc., to use their acronyms) will have become by, say, 2010, nor how far international or even global retailing operations will have become the norm. The effect these will have on the whole nature of food supply in Europe is also very unclear. This implies that companies should be approaching the future with a series of possible scenarios in mind – each of which will have its own strategic and operational imperatives.

Scenario planning has the potential to free companies from the strictures of received wisdom and also to focus their attention on the operating environment rather than internal issues. Promar is currently conducting new research into the forces acting on the multiple retail sector in Europe, and developing alternative scenarios for the future.

For further details of the report, Multiple Retail in Europe: Scenarios to 2006. Opportunity and Challenge for Food Manufacturers, please contact Helen Grant, Business Development Manager, Promar International. Tel: +44 (0) 1635 43363; Fax: +44 (0) 1635 43945; E-mail: hgrant@promar-international.com