managing director, srcg
It appears clear that whatever happens will take place against the backdrop of an economic slowdown in the Western world, whilst China and India power ahead. During the year the US sub-prime mortgage fiasco will slowly unravel, revealing a global banking crisis, and in response consumer attitude to credit will change, with cash becoming fashionable again as a ‘retro’ payment
accessory.
The US presidential race will finally see climate change taken seriously on the other side of the Atlantic (at least until the day after the election) and green trends will continue to develop and spread internationally. In the UK green taxes will be imposed and recycling will become a top priority as the Government finally introduces charges based on the weight of rubbish disposed of – this has a major impact on retailers and suppliers as consumers challenge excessive packaging and ‘dump’ it at supermarkets. The Government bans all advertising on plastic carrier bags, resulting in all retailers moving immediately to re-useable bags, which they issue free for everyone.
The consumer trend towards healthy living strengthens, and premium and Fairtrade continue to rise in importance. The demand for local food intensifies, but restaurants and retailers continue to struggle with how best to deliver this. Meanwhile, consumers shift their focus towards ‘authenticity’, of which local is only a part. Clean recipes will become more important and food suppliers will spend 2008 removing additives, preservatives, colours and unknown ingredients from their recipes.
2008 will not pass without another major food scare, and as a result the average food price index rises more than in the past 10 years. Mid-year fuel prices hit £1.50 a litre, on the back of a Middle-East showdown, sparking consumer unrest and a massive growth in demand for greener hybrid cars.
Retail technology will continue to evolve with the rapid uptake of wave and pay solutions and the unchecked roll-out of self-checkout systems. There will be signs of a mobile services revolution as big high street brands jump on the MVNO (mobile virtual network operator) bandwagon; in the hope of directly linking their brand into the shopping experience. The UK will embrace the Japanese model and use the mobile phone to manage their lives; from mobile wallet to camera to MP3 player to email to internet access; but identity theft scares will result in the need for everything to be biometrically coded.
Mobile access to the Internet will result in a further boom in online shopping, placing intense pressure on high street retailers, with several going into administration. Entertainment retailers beware.
UK convenience will continue to grow faster than grocery and the returns will attract one of the big Japanese c-store retailers to make a foray into the market. Not to be outdone, Asda will also make a serious play and attempt to buy an existing UK chain; Somerfield or Iceland maybe? But it will be thwarted by Sainsbury’s, which promises to break up the chain and share the outlets with Musgrave, Spar and other traditional convenience retailers. The Competition Commission admits it was wrong after all, resulting in Tesco offering Express as a franchise, leading to even more intense pressure on the high street. Globally oil companies will continue to withdraw from operated retail and there will be a growth in strategic alliances on the forecourt as established food retailers clamour to gain control of these locations.
In grocery someone will finally buy Sainsbury’s (or perhaps not) or investors will lose interest in them and Morrisons will become the next private equity capture. And what of our pride and joy, Tesco? In the USA Fresh & Easy will prove a success, but expansion plans will be thrown into confusion as Wal-Mart decides to take it on; head-on. More surprisingly, Tesco announces a move into the Australian market, whilst continuing to push into India and China. Sir Terry Leahy is offered a peerage and a brief in the House of Lords to fight climate change.
A challenging year ahead; but at srcg we wish everyone all success for 2008.
