South divide — Its implications for the retailer Available to Purchase

All the indications are that the recession, having savaged industry mercilessly over the last couple of years, has turned its baleful attention on the consumer. Since March 1981 real incomes have been falling, and the forecast (by Capel‐Cure Myers) is that this erosion of real incomes will continue this year. Unemployment — the most tragic affliction of society — is, as is well known, around the 3 million mark; the significant point here is that regional variations are not only substantial but that they create a marked discrepancy between employment levels in the north and north‐west as opposed to the south and south‐east. The national unemployment average stands at 11.7% — but it is 14.8% in the north and only 8.7% in the south east. Even an area such as the Midlands, traditionally prosperous, is now having to receive assistance. This gap will continue to widen. The DoE forecasts that only 1% of new jobs will be created in the north‐west to 1986, 2% in the north and 3% in Wales — as against 34% in the south‐east. There is also clear evidence that investment increasingly favours the south and south east at the expense of the north and west; rental growth south of the Humber/Severn line is now several points higher than in the north. How is the retail sector responding to this economic polarisation? At a conference on Merchandising organised by the Retail Management Development Programme in March, it was evident that it is going to be a factor at the forefront of retail management awareness when planning capital investment programmes. As David Malpas of Tesco commented: “it is as interesting to speculate about Asda's enthusiasm for obtaining planning consents in the south, as it is to note that much of Sainsbury's strength has turned on concentrating their business in the south and east.” And the type of premises developed may well begin to show marked differences in line with this economic polarisation. Three years ago Tesco forecast that retailers in the more depressed areas would trade increasingly out of stripped‐down, limited range discount stores. The effects of the polarisation will inevitably spread to the types of merchandise; Tesco have already announced they are extending their test market for generics further south, to Yorkshire and the north‐east following their initial test in Scotland. But while the larger supermarket groups continue to major on fresh foods, there seems — inexplicably — no market yet for downmarket fresh food. Yet, with women being thrown out of work at a faster rate than men, and with real incomes declining, it would seem logical that more time and less money should prompt more careful shopping and cooking. When the question was put to David Malpas at the conference, he confessed himself baffled. “It's a paradox,” he said, “I see women piling up their trolleys with expensive convenience foods when they should buy better ingredients at cheaper cost.” With economic reality becoming harsher, will the price of such capriciousness soon affect spending patterns? Looking at the country as a whole, what will people be spending their money on in the immediate future? John Richards of Capel‐Cure forecast a rosy future for home entertainment, especially video, audio and photography; and for sports equipment and clothing. And DIY still looks good. But he was doubtful about clothing, women's cosmetics and jewellery. And the beer market looks cloudy. In this report on the merchandising conference we concentrate our attention on two papers only — the economic background provided by Tony MacNeary and John Richards of Capel‐Cure Myers, and the implications of this for the retailer by Tesco's David Malpas. These papers, we feel, are deeply significant for everybody in the retail and distribution sector.