A merger of Australia's two largest retail industry associations backed by major chains Woolworths, JB Hi-Fi and Chemist Warehouse has been scrapped because of concerns about member representation and the financial viability of the new entity.

The retail sector's peak body, the Australian Retailers Association, with the backing of major retailers who were previously members of the defunct Retail Council, had been in talks with the Queensland-based National Retailers Association for almost a year with a view to creating a single entity to represent the $300 billion sector.