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The UK retail market is currently recognised as the third largest in the world, beaten only by the US and Japan. Sales are approximately worth £330 billion with the retail sector generating 8% of the GDP of the UK.
Retail represents the sale of goods and services from individuals or businesses to the end-user; this is part of an integrated system called the supply chain. A retailer purchases goods or products in large quantities from manufacturers directly or through a wholesaler, and then sells smaller quantities to the consumer for a profit.
The UK retail market employs around 3 million people. One in ten of those in employment currently work in the retail sector - the highest proportion of UK private sector employment. Retail encompasses a wide range of professions and is at the forefront of workplace skills development and flexible working. There are 450,000 shops in the UK owned by 300,000 enterprises, including 9% (190,000) of all VAT-registered businesses, with shops accounting for more than a third of consumer spending. Following strong growth in recent years, internet sales currently account for only around 9% of total sales.
The UK retail market is one of the world's most competitive and innovative industries. Not only are UK retailers amongst the world's top performing companies but the UK attracts many global brands setting up flagship stores to attract both domestic and overseas visitors to prime retail locations across the UK. The value of overseas shoppers in London is around £2 billion per annum. Many other UK locations recognise the importance of retail as a leisure activity with many initiatives linking retail to tourism in locations such as Leamington, Torquay, Nottingham, Solihull, Medway, Glasgow, Falmouth, Skipton and Rye.
Retail also plays an important role in regeneration. Leading retailers are major constructors in the UK, investing not only in shops but houses, infrastructure, and even civic centres.
Retail services encompass a wide variety of formats, product ranges, business structures, locations and sales channels. Retail has many connections with other markets both upstream (e.g. suppliers, logistics providers etc.) and downstream (e.g. consumers).
Retail is usually classified by type of products as follows:
1. Grocery products
2. Hard goods or durable goods - appliances, electronics, furniture, sporting goods, etc. Goods that do not quickly wear out and provide utility over time.
3. Soft goods or consumables - clothing, apparel, and other fabrics. Goods that are consumed after one use or have a limited period (typically under three years) in which you may use them
In 2011 grocery retailing took the lead in terms of growth compared with non-grocery retailing. The grocery market was worth £156.8 billion for the calendar year 2011, an increase of 3.8% on 2010. Despite positive growth within non-grocery retailers, grocery retailers saw a better performance, with a healthier growth rate. Although retailers took on new formats which helped to drive growth, many non-grocery retailers selling big-ticket items or items considered non-essential struggled to attract consumers' interest.
Tesco remained the leader in retailing in the UK in 2011, with almost double the share of its closest competitor, Asda Stores. Both Tesco and Asda Stores further strengthened their positions, gaining marginal share, Tesco up by 0.8% and Asda Stores up by 0.4% in store based retailing in value terms. In overall retailing Tesco only saw a negligible increase of 0.1% and Asda Stores was up by 0.3%. With both companies improving their positions, Asda was unable to make any progress in terms of closing the gap from its closest rival.
There are 88,441 grocery stores within the UK retail market. These are split into four sectors, which are defined as follows:
1. Convenience stores:
stores with sales area of less than 3,000 sq ft, open for long hours and selling products from at least 8 different grocery categories, (e.g. SPAR, Co-operative Group, Londis).
2. Traditional retail:
sales area of less than 3,000 sq ft such as newsagents, grocers, off-licences, & some forecourts
3. Hypermarket, supermarkets & superstores:
Supermarkets have a sales area of 3,000-25,000 sq ft. Superstores have sales area above 25,000 sq ft. Hypermarkets are over 60,000 sq ft.
All sell a broad range of mainly grocery items, Non-food is also sold (e.g. Tesco, Asda)
4. Online channel: Sales via the internet
Non-food retailers are being forced to analyse their location strategies. In the face of falling sales and volumes, combined with rising operating costs, retailers can no longer afford to run unprofitable stores. When volumes were high and there was growth in the market, retailers' best performing stores would support underperforming ones and the latter would be supplying cash to boost the topline. Now however they are a drain on profits as margins tighten.
Non-food is the biggest loser, shrinking by 0.5%, or £0.7 billion. Between 2007, the year before the recession, and the end of 2012 non-food spending will have shrunk by £9.5 billion. This is only a little under the total combined sales of John Lewis, Next and M&S' non-food sales.
The UK's online retail market is set to grow 13% in 2012 - cashing in a huge £77 billion. UK consumers spent a whopping £250 billion online over the past 10 years. The UK's online retail market is now expected to grow by 110% in the next decade, to reach £123 billlion in 2020.
The forecast further strengthens the UK's position as a global leader in the market, second only to the US in terms of market value. The market has exploded in recent years, with 30% of all cross border trade in Europe, going through UK retailers.
The UK's online retail market is a huge business - last year research found that there were 228,000 UK online retail businesses, an estimated 30% more than the year before. This number has been predicted to double to 1.5 million by 2015. Confidence in online sales is expected to strengthen over the coming decade and by 2020 it has been predicted that the internet will account for half of all retail sales and influence most of the other half.
For more information on the UK retail market, see the latest research: UK Retail Market Reports
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