Retailers face a tough job to get consumers spending again
23 June 2020: From 15 June, non-essential retailers were finally allowed to welcome shoppers back into their stores. But the sector is unlikely to recover any time soon.
Despite the media images of queues of customers outside Primark, Sports Direct, many customers stayed home when non-essential stores reopened last week.
Getting customers back instore is going to be a huge challenge, despite the sterling efforts of retailers and centre owners to ensure consumers are safe. "Physical retail for non-essential items will be difficult, and will take some time to recover," admits Peter Williams, chairman for retail businesses including Superdry, Mister Spex and Sophia Webster and a former chief executive of Selfridges.
Figures reveal a devastating impact
For essential retailers such as the supermarkets, sales have boomed although costs, including investment in extra staff, online delivery capacity and instore protection measures, have also risen.
Online sales have also soared as e-commerce became the only way to get many goods. In May, they rose to 33.4% of sales, up from 30.8% in April, according to the Office of National Statistics (ONS). They will likely remain steady as for some consumers buying patterns will have changed for good. "It will accelerate some of the shift between offline and online," says Williams. "That's not spelling the end of the high street, but an increasing amount of money will be spent online."
For the rest of the retail market in the UK, the impact has been devastating. ONS figures show a fall in GDP of 20.4% during April, the worst ever recorded.
Meanwhile, retail sales volumes plunged a record 18.1% in April, according to the ONS. They recovered slightly in May, up by 12% on the previous month. However, it was still down by 13.1% compared to February, before the impact of the pandemic hit.
The cumulative impact makes for sober reading. For the three months to May 2020, the volume of retail sales decreased by a record 12.8% across all stores except food and online.
Inevitably such devastation has already led to casualties. Those businesses already struggling were pushed over the edge by their forced store closures. One of the first was the Oasis and Warehouse Group which fell into administration in mid-April and whose stores and online businesses have now ceased trading.
Fashion has been one of the hardest-hit sectors with a 50.2% dive in the volume of clothing sales in April compared to the month before, according to ONS figures. It meant further companies entering administration, including the UK divisions of footwear retailer Aldo and lingerie retailer Victoria's Secret, as well as Monsoon Accessorize, Cath Kidston and Quiz.
Emergence from lockdown and a look to the future
So how can retailers emerge from lockdown and look, with at least some degree of confidence, to the future? Williams says that ensuring a firm grip on finances is paramount. "Retailers have focused hard to ensure their banking facilities and liquidity positions are such that they can survive and focussing on cash management and management of stock levels is crucial," he says.
There will be more changes to come as retailers work on longer-term reviews of their businesses, including such things as leases, rents and store portfolios. That's according to Chris Igwe, global retail expert and president of international retail advisory service Chris Igwe International.
"Inevitably, many retailers will fail," he says. "Many have already, and it is far from over. Retailers will have to apply the "less is more" approach to their businesses ruthlessly. Fewer stores, optimally sized for the markets they want to be in, with the right merchandise and the right price."
Williams agrees that we will see change. "There will be fewer shops. Stronger centres will survive, but some of the weaker ones will have to be reinvented," he says.
He also believes that high streets may well recover quicker than the larger malls, partly because of a shift to buying more locally during lockdown. High streets can also cope better with social distancing than larger centres which draw a wider audience and often rely on public transport to get customers to them.
But as well as ensuring their business infrastructures are robust retailers have had to overhaul the instore experience too. Retail, which has focused for so long on delivering additional leisure and experience, has had to revert abruptly to being perfunctory. Customer numbers are limited, one way systems are in place and browsing, touching and testing goods is now restricted. Staff training and reassurance has also been crucial.
Igwe believes staff will be vital to winning consumers back. "There is a loss of confidence by the consumer to go shopping. This will pass with time once customers are sure that the shopping centre and the retailer are putting their wellbeing above any financial gain (i.e. driving sales or footfall). Retailers need to focus on providing an omnichannel offer and experience to capture the consumer. They also need to hire and train staff to be proud of their work and not just to sell, but to reassure," he says.