While shopping, if you’ve felt that big business just keeps getting bigger, your instincts would be right.
Over the past four years, small businesses market share dropped from 39.5 per cent to 36.5 per cent in the $252 billion industry, according to a report from Morgan Stanley equities research.
"The weak retail environment is having a disproportionately large impact on smaller retailers," said Morgan Stanley Australia equities analyst Thomas Kierath.
Looking at retail downturn during the late 1990s showed that larger grocery and food and clothing companies took "considerable" market share from smaller players - "and this share doesn't come back," the report said.
The advantage larger players such as Woolworths, Coles, Myer and David Jones have suggests they would emerge from the current retail slump in "far stronger market positions,’’ helped by lower costs and better distribution networks.
Retail sales rose 1 per cent in June, quicker than a revised 0.8 per cent rise for May, according to the Australia Bureau of Statistics but remain at subdued level compared with longer term growth trends. However, the jump was the biggest two-month gain since $19 billion of stimulus payments were delivered between December 2008 and April 2009.
The report found that large food retailers held about 75 per cent of market share in March 2008, which has since risen to 79 per cent. Over the same time, the market share of smaller grocers moved from 25 per cent to 21 per cent.
"In the clothing and accessories market, smaller retailers have lost about 9 percentage points in market share to large retailers since March 2008," the report said. The gain is driven by large retailers’ ability to directly source large volumes of goods and the capability to distribute private label brands, the report said. "Smaller retailers don’t have the size or distribution platforms that enable this."
Additionally, larger retailers can move supply chains closer to manufacturers and pass the savings along to consumers, the report said.
Finally, larger retailers have the advantage of national marketing campaigns through the media, such as Coles’ sponsorship of the reality cooking show Masterchef.
Australia’s retail sector has struggled in recent years, a slump in consumer spending triggered by the global financial crisis in 2008 and the acceleration of online shopping pose an existential threat to many traditional business models.
While consumers could long purchase goods from overseas retailers like Amazon.com and Book Depository, the strength of the dollar, as well as growing awareness of lower prices abroad, has sped the shift.
Nonetheless, the disruption to the industry by the internet has allowed for a wave of upstarts such as general merchandiser CatchoftheDay.com.au, electronics retailer Kogan.com, and Appliancesonline.com.au which, while smaller than their bricks and mortar rivals, have the advantage of building their businesses for internet - rather than struggling to respond to it.
The Morgan Stanley report concluded that categories of retail sales such as car sales, restaurant and casino trade, not exposed to the internet are growing.
"This indicates to us that part of the retail weakness is as a direct result of increased internet-led competition."
The National Australia Bank online retail sales index for June rose 19 per cent year on year, accounting for about $11.5 billion in that time.