Retailing in Britain: Traditional Retailers vs. Discounters


Themes: Strategy
Pub Date : 2005
Countries : Europe
Industry : Retailing

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Case Code : COM0081
Case Length : 5 Pages
Price: Rs. 200;

Retailing in Britain: Traditional Retailers vs. Discounters

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"IT'S not just the prices that are coming down on Britain's high streets: it's the share prices, profits and reputations of some of the biggest high-street retailers." 1

"After enjoying boom conditions in Britain and America for far longer than other industries, retailers are finally facing recession."2

- Marshall Meyer, Wharton Professor, Management Studies

Retailing in Britain: Traditional Retailers vs. Discounters

"Napoleon once stated, in derisory fashion, that Britain is a nation of shopkeepers.What he didn’t expect was for the British to take this as a compliment.”3 British retailing industry stood true to its reputation for ages and by the turn of the 21st century, it grewto be one of themajor sectors of theBritish economy. In 2001, sales fromretailing industry accounted for 23% of the British GDP and employed over threemillion people, which translated to one in every nine employed4 in Britain. By 2004, British retailing industry at $443 billion5 was the second largest retailing industry in Europe after France. As the industry startedmaturing the traditional players faced difficulties, both, in terms ofmaintaining growth rate andmarket shares due to intensifying competition. Even iconic retailers likeMarks and Spencer&",WHSmith and J Sainsbury became takeover targets by the end of 2004. EdwardWhitefield, chairman ofManagementHorizons Europe, a retail consultancy in London, commented, "In a consumer economywhere the rate of growth is tightening, the sheep will be sorted out from the goats.”6 Analysts opined that the traditional retailing giants, who contributed to the growth of the industry, were struggling to exist in the changing landscape of British retailing industry.

Retailing Landscape in Britain

The history of British retailing industry dates back to early 19th century,with small scale, independent retailers selling a limited variety of products in towns across the country. In the second half of the nineteenth century with urbanisation and development ofmass production of consumer goods, particularly in consumer durables, led to the emergence of large-scale retailing - chain stores and branding of products. By 1860, such stores replaced the then existing draper7 stores such as Shoolbred in London and JW Campbell inGlasgow, as product lines extended beyond the narrow range of drapery. This period also witnessed the emergence of food retailing activities due to the growth of Co-operative societies,8 which originated in 1844. By 1862 there were 400 Co-operative societies which grew to 971 societies by 1881. Innovations in packaging dry foods in the last quarter of the nineteenth century resulted in the emergence of large department stores.9 It had led to the development of regional and even national chain stores. The first chains were established byWH Smith and JohnMenzies, who were news paper agents.

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1]"High Street woes",, July 26th 2001
2]"When you can't sell the goods, sell the shop",, January 16th 2003
3]Kalms, Stanley "Why the euro is bad for British retailers",, September 27th 2001
5]Cohn, Laura "Britain: The Battle For High Street Has Begun",, February 7th 2004
7]One who sells fabric and sewing materials in a shop
8]The Co-operatives emerged because of politics of sections of the working class movement which, after the defeat of Chartism, (the principles and practices of the movement advocatingpolitical and social reform in England between 1838 and 1848) led them to search for alternatives to capitalism rather than overthrowing it.
9]A large store that sells a wide range of goods through separate departments