Symbol groups need to consolidate to boost their buying power and offer better margins to help retailers overcome challenges like the National Living Wage, industry figures have said.
In an exclusive interview with Retail Newsagent, David McCorquodale, head of retail at consultancy KPMG, said buying groups need to do more to help retailers get better margins to offset increasing financial pressure.
He said the route to survival was through symbol group mergers which will allow groups to boost their numbers and ability to negotiate deals with suppliers.
“The challenge for buying groups is that price deflation is coming in and retailers’ margins are getting squeezed,” he said.
“If these groups put their volumes together, they ought to be able to negotiate better deals with suppliers and therefore pass on better margins to retailers.
“We have already seen consolidation with Booker and Musgrave, but I believe we need more consolidation to help stores survive challenges like the National Living Wage.”
His view was echoed by Raj Krishan, sales director at Blakemore Wholesale, who said mergers were a possible way towards future growth in the current flat market.
“Costs are going up and with things like the National Living Wage the challenges are there. The industry needs to make sure it can pull in the margins to make it sustainable,” Mr Krishan told RN.
“Everyone needs to give value and more margins to retailers. Convenience hasn’t grown over the past year and a boost is needed.
“Booker and Musgrave joining forces needed to happen and they are now seeing the benefits.
“So from the outside looking in, I can see consolidation as a solution.
“The big players are going to get bigger and the smaller ones need to see where they can compete and add value.”
Full interview with David McCorquodale in 12 August issue of Retail Newsagent