The retail industry is down but not out – but when does it get back up?
One of the many advantages that data brings is that it helps quantify feelings and hunches.
Everybody knew that physical retail had suffered with the advent of the coronavirus lockdown but nobody knew exactly how much until now.
It’s a lot – UK retail footfall saw its biggest decrease on record in April.
The industry as a whole saw an 84.7% decline in visitors based on the figures from April 2019. Shopping Centres and Malls saw the biggest decline with an 87.8% reduction to their sites.
March saw a decrease of 41.3% but last month saw this decline double. This is in addition to actual retail sales figures falling too – down 19.1% last month from April 2019.
Helen Dickinson, Chief Executive of the British Retail Consortium, said: “Lockdown has dramatically cut footfall traffic across retail locations with the majority of physical stores closed to the public.
“With lower footfall likely to continue, along with a corresponding fall in sales, and with demand likely to remain low, many retailers will not return to normal trading for some time, even when they’re allowed to reopen.
“We’ll see an acceleration of many trends seen prior to the coronavirus pandemic – lower footfall as many consumers choose to browse digitally, and a corresponding rise in online sales.
“These changes are requiring retailers to adapt quickly so that the industry can meet the needs of modern consumers and deal with the challenge the pandemic is presenting.
“Ultimately, the very nature of many retail jobs will change, with impressive customer service and the effective use of technology becomes even more vital.”
The figures are hardly surprising and are yet another in a series of seemingly never-ending blows to physical retailers under assault on all sides from landlords, suppliers, online competitors and a receding pool of physical customers.
Some retail businesses cannot afford to wait any longer and have taken the step of reopening. The government has published some official safety guidance for stores and many are adhering to it while making individual amendments to suit their own layouts and staff.
Some retailers are increasing the pace of their reopening ahead of the official phased reopening of non-essential retailers currently scheduled for June 1st but many others have yet to be able to reopen their doors at all since the lockdown came into force on March 23rd.
Customers are still shopping while they’re in lockdown, but they’re doing it using the digital options available. Overall consumer spending for April 2020 is up 5.7% and online sales excluding food jumped 57.9% in the month.
Considering annual online shopping growth is only 8.5%, this is accelerating a process that was already gaining momentum. Helen Dickinson admitted that: “It’s likely as the lockdown wears on, these new shopping habits will become more entrenched for many consumers.”
Argos reported last week that their overall sales are slightly higher now through digital channels alone than they were in the final quarter of 2019 when they had 573 physical stores open. Dixons Carphone also said that online sales had recouped almost two thirds of sales lost from closing its stores.
Fewer physical stores and shoppers is just one of the trends emerging from this current phase affecting retail and it’s not hard to discern other emerging factors that could have longer term implications for retailers.
In the first weeks of the lockdown, staples such as pasta, flour, hand soap and toilet paper were the first to sell out in large quantities. Stores that were open responded quickly to analyse and focus on the resupply of essentials above anything else.
One-pint milk cartons vanished overnight and product choice in areas such as bakeries was rapidly narrowed. Retail analysts call this Minimum Viable Range – a retail specific application of the better known Minimum Viable Product concept – and predict that this and other examples of range editing or limiting will remain long after the lockdown has passed.
Economically, stocking and selling larger volumes of fewer products is more efficient and by reducing choice and range of basic staple items allows retailers to concentrate on innovating in higher margin areas such as relatively new vegan food ranges as an example.
Increased use of technology has also seen some retailers look into exploring partnerships to eliminate unnecessary risk and cost and instead concentrate on their own strengths.
Morrisons and Aldi have signed up with Deliveroo to perform their home delivery service while the Costcutter chain have entered an alliance with facilities management company, Compass in order to open a range of their branches within hospitals.
Smaller and independent retailers can take advantage of their agility to use technology differently but just as effectively.
The Amazon Marketplace and Ebay are well understood by consumers who are already shopping online so rather than invest in a bespoke online retail platform or website, it might make sense to open where the customer already is. Many UK small businesses have realised this with 50,000 signing up on Ebay in February alone this year while Facebook has announced that it is about to enter the online retail space with Shops – an ecommerce spinoff within its existing platform.
Successfully executing a pivot is a lot harder to do in theory or practice.
Reopening, restocking and ramping up sales is difficult enough but when you have furloughed staff and other coronavirus support loans and support to apply for, it might just be too much.
A lot of good companies will go out of business after the lockdown is lifted and it’s through no fault of their own. Too much has happened in too short a period of time for them to make all the necessary internal adjustments while continuing to try to meet their customers needs and demands at the same time.
But there are options and help available for any business that can’t see a way forward immediately.
We can advise on strategies and tactics you can apply now to buy your business time with creditors while you decide what direction you want to go in.
Also we can help you answer any structural questions and give you some ideas about what you could do to make your company more resilient.
Whatever you decide, we’re sure that we can help.