The Retail Industry and the Coronavirus - Andrew Turnbull

The headlines have been stark. 2019 had already been the worst year for retail for 25 years with overall sales down for the first time since 1995. A 5.1% decline in UK retail sales in March this year was the steepest fall since data collection began in 1996. April’s figures will be worse. No recovery is expected until the High Street is trading normally, which at best will be September. 

The figures mask very different fortunes. As previously, when a left field event is experienced, the impact is not evenly spread. Many retailers permitted to continue trading, have bucked the trend.  Non-food operators, however, deemed non-essential, that had to close their doors in mid-March, are still watching and waiting.

Primark, for example, went from a business turning over £650 mn per week, to nothing. They do not trade online. John Lewis, the UK’s largest department store, now relies totally on its online sales for revenue and it’s unlikely that all of their outlets will re-open. Next indicates that sales will be down 40-50%. 

Some chains have already gone. They include Oasis, Warehouse, Debenhams, Laura Ashley and Cath Kidston. Others such as HMV, some M&S stores, and Philip Green’s Arcadia group are under threat. The British High Street is struggling, and the permanent closure of thousands of businesses, including many smaller independents, may follow.

Clothing retailers face the added headache of dealing with unfashionable and out-of-season stock. Suits and dresses have been exchanged for casual wear, with ASOS and Missguided currently promoting comfort wear, not spring dresses or going out wear.

The winners include online only traders, such as Amazon, which, according to some, already accounts for almost 20% of all retail sales. Ocado experienced a 19% turnover increase in April, and online fashion providers, such as Boohoo.com are performing well. 

Back in the real world, online business at Waterstones is up 1400-1500%, as those stuck at home are reading books. Dixons Carphone have seen sales during lockdown rise by more than 165% from increased movement of, for example, cookware and entertainment systems. Within ‘clicks and bricks’ food retailers, the proportion of business accounted for by online orders has risen since March from 7 to 10%. Tesco will soon have the capacity for 1.2 mn home deliveries, up from just 600k before the pandemic hit. Online grocery shopping this year is up by a third.

Food sales have risen sharply, up 11%, driven initially by a short-lived surge in panic buying (for five consecutive days in March, Sainsbury experienced sales greater than their busiest trading day at Christmas).  Convenience stores are performing best. Turnover at the Co-op has increased by 20%.  Nisa and Londis are up by 40%. In contrast, Asda, with little in the way of any convenience business, is ahead by just 3.5%.

Success comes with a cost, however, as most stores open are incurring additional expense through infection control measures, such as Perspex screens and sanitising hand gel. The shopping experience presently, is hardly a pleasure. Once a social occasion, it is now subject to restrictions including queues to enter, shopping alone, one-way systems and strict hygiene controls. Who is not irritated by the halfwit or deliberate rebel invading your space or heading in the wrong direction? A contributory factor undoubtedly, to the return of the weekly shop. Instead of visiting stores 3-4 times a week, shoppers are going once, but basket value has doubled. 

The appeal of home delivery is only too obvious. Once the older generations and other vulnerable groups embrace the technology, there will be no turning back. Online now represents 22% of all retail and its popularity will continue to grow as the move away from the High Street continues.   High Streets will need to apply for a change of use, with fast food outlets and pubs among those who will need to change their ways. 

Currently, a third of shoppers say that, in future, they will be more mindful, they will incur less waste and they will spend less on non-essentials. Unlikely!  One in five say they will spend less going out. More likely. 

Working from home may become much more of a standard, which will accelerate the move towards more relaxed dress, as well as ready meals and home baking. Flour is the one item still in short supply, as otherwise the food supply chain is back to normal.

Offline retailers must engage with customers to keep the buying habit going where and how they can, with experience critical. If there is nothing to be gained from a visit to a store, why bother?

Health & Safety concerns will nevertheless be reflected in ongoing in-store restrictions. Social distancing and other such precautions will continue long after this pesky virus is beaten. 

Retailers must also offer fair rewards to employees. 45000 new workers were taken on at Tesco alone during April, including delivery drivers, shelf fillers and till operators, who should not be discarded as demand settles. More of this labour force will be unionised.

Cashless shopping has been on the rise for years and this trend will continue, hastening the demise of the cheque book, a High Street banking presence and even the ATM.

Lastly, shoppers will reward retailers that demonstrate corporate social responsibility, supporting good causes, environmental well-being and even providing aid for their competitors. Amazon recently donated £250k to a fund supporting bookshops.  More people reading books could become a habit, helping everyone.

Little in retail will be the same again. Reputations have been made and lost in a matter of weeks.  Sometimes it’s luck which determines who wins and who loses, but fortune favours the brave and size is not always the key factor. The Internet knows no bounds, even if in-store floor space may be limited.  Ultimately, the size of the dog in the fight won’t matter as much as the size of the fight in the dog.