Executive Summary

Key Note estimates that sales in 1995 from the UK's mixed retail businesses at current prices were £29.3bn, an increase of 2.3% against the £28.6bn achieved in 1994. In 1995, the sector which contains some of the largest and most profitable retailers in Europe, accounted for 18.4% of the total UK retail market, second only to food. Almost half the business (45.6%) in 1995 came from six High Street variety store chains, with a major share held by Marks and Spencer. Department stores accounted for 27.6%, mail order 21% and catalogue stores 5.7%.

Sales forecasts at current prices from 1996 to the year 2000 for the sector as a whole show total sales increasing to £36.99bn (20.48%), of which department stores will account for £9.8bn (15.9%), variety chains £17.1bn (21.5%), catalogue stores £2.9bn (50%) and mail order £7.2bn (14.8%). At estimated 1996 prices, sales are forecast to grow at 5% ahead of inflation as measured by the All Items Retail Price Index.

The sector will become even more competitive and there are likely to be a number of takeovers or mergers as larger department store groups absorb some of the many independents and medium-sized chains. At present, the UK has too many variety chain store groups and at least one major merger or takeover seems likely. Home shopping will also be subject to such activities with bids coming from Continental groups or other large UK mixed retailers. Catalogue stores are under-represented in the market and the next 5 years could see new entrants as well as considerable diversification. For the market as a whole, increased competition is likely from supermarkets and superstores, as they expand the range and selection of non-food merchandise carried in larger stores.

The dividing lines between retailer categories will become blurred, as variety chains expand the product ranges of larger outlets to become department stores; High Street retailers complement shop sales with catalogue sales; and home shopping companies join with shop-based retailers to gain access to enlarged customer bases.

In mail order there is a distinct trend towards direct response as opposed to agency selling. Competition from large European and US mail-order houses and the availability of new technology, which provides the tools to make links between the mailing house and the customer more manageable, are forcing the market in this direction. Developments in digital broadcasting are likely to increase the influence of armchair shopping via TV.

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