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“The large store is the future”, states Ian MacLaurin, in a positive affirmation of belief in the superstore. In the hypermarket lies the most practical answer to the problem of reduced costs and lower price. In distribution terms, the advantages of one massive delivery to a single hypermarket are obvious. Apart from the hypermarket, there are other target areas for cost reduction: transport and delivery, packaging, advertising, stock control — even items such as store lighting and administration. In an economic climate where margins are being government‐controlled it becomes not merely desirable but mandatory to examine these areas with the closest possible attention. This is a summary of Ian MacLaurin's paper to the Food Manufacturers' Federation conference at Bournemouth.

The story of Tesco's abandonment of trading stamps and launching of Operation Checkout has been told perhaps more than enough over the past year. What is not so well‐known is the effect that rapidly boosted turnover had upon their distribution system. “We must recognise the fact,” says Ian MacLaurin, “that we came very close to breakdown.” How Tesco coped with the problem is described in this exclusive feature.

In October financial analysts Capel‐Cure Myers had the intriguing idea of putting on a seminar centred largely around the stories of three major retail companies — Burton, Debenhams, and Tesco — all of whom have been through pretty rough times over the last decade or so but have managed, relatively recently, to achieve successful turn‐rounds — to show improved turnover and profit figures, in effect, to “regenerate”. In each case the chief executives of these companies spoke frankly about the mistakes their organisations had perpetrated, and the solutions they had adopted to bring about essential change. Intriguingly, though the companies are all very different in their retail formats — a grocery multiple, a specialist clothing chain, and a department store group — yet they had several solutions in common. Ralph Halpern of Burton pinpointed the secret of his success as “multi‐strategy market positioning”, which means identifying specific segments of the market and operating several companies with clear identities which are positioned to appeal to them. Much the same was done by Debenhams, who found in the early 70s that their traditional middle‐class department store market had faded away with Edward Heath's three‐day week and the power cuts, and they had to position themselves to appeal to an entirely different clientele. And all three companies emphasise the need for efficient systems of information technology. “Historically,” says Tesco's Ian MacLaurin, “we traded in goods. Now we trade in information too.” Remarkably, and an added factor which makes the achievement of these companies more striking, is the fact that recovery, for all three, took place against a background of the worst recession this country has seen for several decades.

The forecast that average wages would rise by at least 10% by mid‐'77 and inflation would continue at 14% were two of the more depressing “prospects” put forward at a recent retailing seminar organised by stockbrokers, Philips and Drew. Speakers at the conference discussed share prospects in the retail sector for the benefit of an audience of potential investors—in the main representatives of insurance companies and pension funds. Financial analyst, Alun Jones, examined the outlook for the whole sector, while Kenneth Bishop, Finance Director, Debenhams; John Samuel, Director and Joint Secretary, Marks and Spencer; and Ian MacLaurin, Managing Director, Tesco Stores each looked at the prospects for their own companies. Below we summarise some of their conclusions.

At the Marketing Society's Annual Conference held in November, 1978, Ian MacLaurin took up the title of the conference — Economic Growth, The Marketing Challenge — with a vengeance. In his paper he deals with the problems of British Industry, and his own company, in adapting to the changing economic environment: what he calls the ‘post industrial revolution’. He pin‐points the trend away from the manufacturing towards the service‐based industries and asks for a concerted effort on the part of government and industry to take note of the present indications of tomorrow's needs. His view is world‐wide, political, social and economic; his call is for a resistance to traditional attitudes and a willingness to prepare for, and adapt to, what the future demands.

As we wallow in the self‐pitying gloom of a British winter bandying words like depression, recession, unions and greed, we short‐sightedly forget what the Club of Rome or “Blueprint for Survival” preached a few years back; what Edward Heath reminded his audience of a few weeks ago—that Britain imports 50% of her food and that the world's population will double by the turn of the century. Supplies—and time—are running out. At a recent Kemp‐Gee conference held in London, Ian MacLaurin examined “reality” for today's food retailer and predicted that by the '80s there will be only five major food multiples left in business—and to a large extent myopic management will be to blame. The time has come to stop fooling ourselves, he urged, and face the moment of truth before it is too late.

Tesco's decision in June to drop trading stamps was not simply a matter of promotional change, but an essential element in the formulation of the whole trading policy of the company. Three cardinal questions demanded consideration: Tesco's own position in the market; the short‐term prospects for the national economy; and a long‐term projection of Tesco performance against future economic developments. Ian MacLaurin delivered an extended version of what appears on the following pages at a recent conference organised by Capel‐Cure Myers.

Planners and retailers are notoriously bad at understanding each other's needs. Central to the lack of communication between the two sides — certainly as far as the location and number of large‐scale units is concerned — has been the planners' insistence on land use, seen within the context of community needs; and the retailers' insistence on the benefits that superstores and hypermarkets can bring in terms of their impact on the cost of living — in itself by no means an insignificant “community need”. Some progress was made towards removing this somewhat sterile attitude of confrontation at the end of May, when Hampshire County Council and the EDC for the Distributive Trades had the happy notion of organising a conference at Winchester for planners and retailers, to discuss two specific points: are town centres the right place for new shops, and can the small shop survive? Crowds of people turned up and much useful dialogue followed. But no firm conclusions were arrived at — and indeed there seemed to be some major disagreements between retailers themselves. Very little that emerged from the conference would be helpful in planning a national strategy for location, but it was a useful beginning in terms of improving the level of understanding between the two sides. The general consensus seemed to be that further conferences would certainly be a good idea.

Our commentator speculates as to whether we might be getting longer intervals between our recessions, and is the next one just starting? All is good news, however, as far as Tesco is concerned, with a pre‐tax profits increase of over 22 per cent. And Ratners have done even better, with a rise in pre‐tax profits as much as 63 per cent.

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.