Happy new year. While Christmas wasn’t as bad as feared, there’s no chance that anyone in retail will be resting on their laurels in what will be a challenging 2008.

So what lies in store?

> More retailers will fail. There is a raft of private equity-backed businesses – particularly in fashion – for which the combination of cutthroat trading and higher costs of servicing debt spells doom. Looking at the quoted sector, if you read the list of main market companies on page 4 from the bottom up, not many of those in the bottom quarter have a compelling reason to exist.

> The high street is changing and the disappearance of certain retail formats is inevitable. The woes of Dolcis, Faith and Stead & Simpson show that the days of traditional mass-market shoe retailing are numbered for a start.

> The grocers will emerge virtually unscathed from the Competition Commission’s inquiry and will have another strong year. But the political pressure will grow to reduce the reliance on alcohol offers to drive footfall, which proved so effective in the run-up to Christmas.

> With tougher times ahead and the retailer’s recovery largely complete, few would be surprised if this is the year that the newly knighted Sir Stuart Rose begins to prepare for handing over the reins at Marks & Spencer.

> While emerging markets will remain attractive, there will be a pause in the growth of UK retailers in established international markets. The new chiefs at DSGi and Kingfisher need to take stock and Tesco has its work cut out in the US.

> After another record online Christmas that was dogged by delivery problems, one non-food retailer will break ranks to presage a step change in online fulfilment by offering timed delivery slots. Once that happens, other brands will follow Dixons entirely into cyberspace.

> Retailers will reassess their store portfolios as an unprecedented amount of new retail space opens and online flourishes. The market will be flooded with unwanted shops and the opening of White City will deal a massive blow to the West End.

> After being oversold last year, general retail shares – at least those in the bigger players – will eventually recover some of the ground lost. There will be further interest rate cuts and, once their impact filters through, who’s to say that consumer confidence can’t recover as quickly in the second half of 2008 as it fell away in 2007?

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