Cautious Optimism for Europe's Retailers

In a major survey of the prospects for retailing in Europe, Mintel's Retail Intelligence argues that Europe is on the brink of a cyclical downtuMRS Conference 2002 Info & Registrationt, even in the aftermath of the recent terrorist attacks, most countries
will escape a full blown recession.

"European Retail Forecasts" covers the 27 leading economies in Western Europe and the former Soviet block and finds that it is the Eastern countries which are growing fastest and which have the most potential for retailers. Most have already been the target for expansion by leading Western retail groups, such as Tesco and Ahold. Retail Intelligence argues that more will follow.

The exception to the cautiously optimistic view is Germany, which already appears to be experiencing a retail recession. In general, however, the report is more optimistic about France and looks to see some benefits from the single currency area for many smaller country members. On the other hand, Retail Intelligence is more negative about those staying out of the Union, such as Switzerland, which has virtually stagnated for a decade and looks likely to continue to do so.

The consumer boom in the UK looks as if it has run its courMRS Conference 2002 Info & Registrationle the present climate has much in common with 1989, i.e. booming retail and property sectors and a record low savings ratio, Retail Intelligence expects the country to be able to escape with a soft landing.

The report forecasts that the top performing sector will be the electricals sector, led by Media-Saturn and the UK's Dixons and Kingfisher groups. The sector is on the brink of another major surge in growth with flat screen technology and recordable DVDs generating a replacement demand in TVs/VCRs to match the advent of colour television in the 1960s. There is also further growth potential in PCs, mobile phones and related products.

Retail Intelligence is also optimistic about the prospects for the DIY retailers, where Kingfisher (UK) is market leader. Growing interest in home fashions and by the increased availability of such products through the development of ever larger outlets will be the main drivers.

The report forecasts that the clothing retailers will continue to underperform. More discerning consumers faced with increasing demands on their spending power from other products will walk away from a sector that is still interested more in controls and logistics than fashion. Those that can respond to changing demand, and meet consumers' tastes and needs (such as Zara and Next), will continue to outperform.

Retail Intelligence points out the responsiveness to consumers' wants so lacking among many of the clothing specialists is being seen among the department stores. The leaders around Europe have belatedly appreciated the benefits of investing in their outlets and capitalising on the demand for more distinctive, better quality and more fashionable clothing, particularly branded clothing.

Among smaller sectors, the report highlights health and beauty retailers. The sector is being revolutionised, partly through liberalisation of the regulations covering pharmacy ownership and partly through the development of new formats, of which Sephora is one of the most striking.

All articles 2006-22 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.

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