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This report has been prepared to analyse the recent financial performance of Marks and Spencer and its competitive position in the UK retail industry.
1.0 Introduction: Retail Industry in UK
The importance of Retail Industry in the UK is evident from the fact that 11% of all enterprises in the UK are retailers, with 184,695 VAT-registered businesses operating in 278,630 retail outlets (Prospects.ac.uk). In June 2005 the retail industry employed 2.9 million people. This equates to one in nine, or 11%, of the total UK workforce (Office for National Statistics (ONS)). UK retail sales were approximately £260 billion in 2005 (ONS). The sector is expected to see the creation of 270,000 new jobs in the years leading up to 2012, with 31% of these at managerial/professional level (Working Futures).
The future of retail industry and the jobs within it are susceptible to economic and consumer trends. A change in interest rates, for example, will affect people’s disposable income and how much, therefore, they are likely to spend. Customer confidence is a key issue: if people feel optimistic about their situation, they will spend more. The UK is undergoing a sustained period of Growth i.e. the level of consumer confidence is holding up, although it is fragile and could change rapidly. Slowing earnings growth, speculation about changes in interest rate and further rise would have negative effect on consumer spending. This would suffer retailers even more as they have already cut their profit margins. A large numbers of retailers are committed to domestic and international expansion.
There has been growth in the areas of online shopping and consumer research. Today’s consumer is different from his/her predecessor. They are more concerned about the environment; they have interest in ethical issues like child labour and working environment for labour. Launch of Euro has facilitated the price comparison for the products on offer by the retailers especially high street retailers. Consumers have embraced the online shopping and are spending the large sums, which have provided opportunities for the retailers like Tesco, Asda and Marks and Spencer.
Retail Industry in the UK is facing the challenges from consumer demands, reducing profit margins, slow down of growth in consumer spending, property and branding issues, increasing legislation and regulation and managing growth it becomes a non-stop challenge to achieve strategic advantage in today’s competitive retail market place. (KPMG)