25 Jul 2008


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Retail sector faces meltdown, report claims

Credit crunch

food prices

Rising costs and slowing demand could create a nightmare scenario for the retail sector over the next 10 years, according to consultants Verdict Research.

The twin pressures could irrevocably reshape the retail landscape, resulting in both bankruptcies and job losses, it claims.

Costs on the up

Verdict predicts retail cost inflation could rise from 4% to 9% or more over the next ten years, as tighter environmental laws, oil price increases and more expensive supply chains take their toll.

Demand going down

Verdict believes that as demand drops retail spending growth will slow to 2.6% a year in the 2010s, down from 6% in the 1990s.

It says: “The two driving forces behind the drop-off in demand are a more constrained consumer and a more considered consumer.

“Economically, consumers will be more constrained as rising household costs and a more uncertain economic backdrop restricts their ability to spend on retail.”

The weaker demand will affect retailers’ ability to pass on cost increases to the consumer.

Verdict said retailers needed to be proactive in managing the risks if they are to survive.