The performance of the UK’s biggest retailers in the last five years shows Tesco is not just at the forefront of the UK retail industry but is now one of the leading global players in the industry. The UK’s leading supermarket holds the top spot as the UK’s biggest retailer ahead of names such as Sainsbury, Kingfisher, Marks and Spencer. It has also moved up one place in the global list this year and is now the world’s fifth largest retail company.

‘The Global Powers of Retailing 2006,’ an annual report from business advisory firm Deloitte, looks at retailer performance. The study ranks the largest 250 retailers worldwide by revenue, and examines the hurdles retailers face as they focus on growing sales and profits in an increasingly challenging environment for retailers.

Top 10 UK retailers
Tracking UK retailer positions in the league table over the last five years shows Tesco has gone from strength-to-strength and held the top slot amongst UK companies throughout this period. Tesco’s overall growth and push up the global rankings is a result of its highly successful growth strategy. As the UK has become saturated and increasingly competitive, Tesco has successfully sought out opportunities and potential in new emerging markets.

For five years Sainsbury has also remained steadfast in its position as the second biggest UK retailer and inched its way up the world’s largest retailers’ list.

Moving down the UK league, Kingfisher has held on to its position as the 3rd biggest retailer in the UK, behind Sainsbury and Tesco over the five year period. In the 2005 study it dropped to one place to 4th position and in the 2006 study it fell one place again to number 5. The drop was triggered by the spin off of Kesa, Woolworths and Superdrug in the past few years. 

Richard Lloyd-Owen head of consumer business at Deloitte said: “The list of the biggest retailers in the UK, and indeed the list of the biggest retailers in the world are both dominated by the grocers. Expansion by the grocers into new areas such as clothing, electronics, homewares, entertainment and financial services means the term ‘the grocer’ is fast becoming an old outdated concept and almost a legacy term. We no longer see these big players as grocers, instead they’ve become mass merchandisers seeking to cater for almost every consumer need.”

Outside of the UK top 3, the remaining UK household names such as Wm Morrison, DSG International (formerly Dixons Group), and John Lewis have gained some ground in recent years, while others have struggled.

Bucking a downward trend, Marks and Spencer regained its place as the fourth biggest UK retailer in the 2006 Global Powers study, following a dip in 2004 and 2005 when it fell to 5th place for two years. Despite up and down movements in the table it still lays claim to being the largest traditional non-grocer in the UK.

Lloyd-Owen added: “2005 was tough for retailers on a global scale although overall retail sales for the top 250 grew by 8%. We expect it to get worse before it gets better. With the host of economic trends squeezing discretionary spend and consumer confidence weakening, we expect sales growth this year to be closer to 5%.”

M&A drives growth
On the upside, the majority of the positive growth stories in the league table both at home and abroad have resulted from mergers and acquisitions. Take a UK example, following the merger with Safeway, Wm Morrison jumped up substantially from number 8 in the 2005 study to number 3 in 2006, reflecting the combined revenues of the group.

Showing some promise
Another UK retailer showing signs of promise is Boots. Between the 2002 and 2005 studies Boots fell from 6th to 10th place. This year’s Global Powers study shows it has moved up one place to number 9 in the rankings.

Looking forwards, if the merger with Alliance Unichem takes place, it is likely to catapult the combined group up the table, and could potentially claim Marks and Spencer’s title as the UK’s largest non-grocer.

New entrants
Outside the UK top 10 Next (#13) and HMV (#18) entered the UK top 20 for the first time in the 2005 study.  Two more have joined in Global Powers study for 2006, Signet (#19) and Carphone Warehouse (#22), both with potential for growth and improved positions in the league next year.

To boost rankings next year retailers must keep an eye on risks
Retailing will become increasingly global and competitive over the next few years. UK retailers seeking increased sales and profits will have to be one step ahead. But as the pressures to stay in the game take over, retailers will be faced with many risks.

Non financial risks and the two Rs
As stakeholders raise their expectations of corporate organisations, being a good corporate citizen and managing corporate social responsibility (CSR) effectively is likely to have a big impact on profitability.

These new dimensions are presenting significant new challenges for companies that have predominantly been only accountable for profitability. Most organisations view CSR as a way to minimise risk. But the most forward thinking companies will see it as an opportunity to achieve competitive advantage.

Lloyd-Owen added: “But when we talk about risks for retailers, regulation has a place at the table. It’s about dealing with the two Rs together - regulation and responsibility, both of these can be equally impactful on consumer confidence and retailer performance.”

International economic risks
The world’s leading retailers source products globally and therefore are vulnerable to the uncertainties of the global economy. Retailers and their suppliers are exposed to the volatility of exchange rates, potential restrictions on trade and movements in the price of oil. Fluctuations in prices and rates can disrupt business plans and hurt the bottom line and retailers will need to make contingency plans to be prepared and flexible in the event of big changes in the world economy.

Ends

Read our executive summary and download the The Global Powers of Retailing 2006 report.

About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP which is among the country’s leading professional services firms, providing audit, tax, consulting and corporate finance services. Known as an employer of choice for innovative human resources programmes, it is dedicated to helping its clients and people excel. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein whose member firms are separate and independent legal entities.  Neither DTT nor any of its member firms has any liability for each other’s omissions.  Services are provided by member firms or their subsidiaries and not by DTT. 

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