The future of post-Covid retail: the current state
As 2020 began, the retail sector was already in the midst of a transformation. 2019 saw the slowest rate of spending growth in nine years; when coupled with a reported 85,000 jobs lost and the doors closing for over 16,000 stores, it was clear to see that major change was needed.
There has been no single factor driving the transformation of the retail sector, nor the demise of so many stalwarts of the high street. Changes in consumer buying habits, economic uncertainty and the rise of omnichannel retailing have all had an impact, but they are just a few of the myriad of factors that have brought the sector to a tipping point.
The future of retail: pre-Covid-19
In a pre-Covid context, we had previously explored the colossal question of ‘what next’ for the sector in a mini-series focused on ‘the future of’. In this, we explored four key areas:
The future of the store: the shift to online means that physical retailing needs to offer a sensory experience that cannot be achieved elsewhere. Stores will become destinations offering a blend of shopping and associated services to fulfil an emotional need for instant gratification.
Whilst this series focused on the consumer facing elements of retail, we’re also seeing that the continued appeal of online shopping and advances in technology has meant that it’s not just the physical act of purchasing something that is changing. Supply chain, logistics, warehousing and storage, the sourcing of products and product provenance are all connected to the changes taking place in retail and all playing their own role in redefining the sector
A tough start
The early months of 2020 brought their own set of challenges, particularly for the high street. Even before the global health crisis hit, a forecasted 17,500 shops were expected to close in 2020 with Debenhams, Mothercare, Karen Millen and Bathcare amongst the early casualties. Evolution has been key with long-term growth strategies replaced with month-by-month tactical activity plans. Major brands and landlords alike have been grappling with the next step, with rent reductions, repurposing of space and site consolidation all on the table as retailers adapt their business models in response to changing spending dynamics.
What followed was tried and tested methods to get consumers parting with their discretionary spend, with sales, promotions and offers dominating the retail narrative. As the health crisis took hold and lockdown measures were enforced, retailers quickly grasped that a change of approach was needed. The role of retailers shifted from a constant ‘nice to have’ to either essential or not which for many retailers, resulted in closing their doors, shutting down their warehouses and pausing their operations. In an ethical stance, many retailers opted to close before it was mandated by the government as they prioritised the safety of their workers.
Prioritising key sectors
For those retailers in key sectors who needed to remain open for business, particularly food retailers and pharmaceuticals, their challenges have been different. Whilst commercially the tills have been ringing loudly both on and offline, behind the scenes there have been complex conversations around supply chain, transport logistics and fulfilment as consumers rushed to stock up on essential supplies.
These retailers have risen to the challenge and quickly adapted to a new way of working in their physical stores to keep both consumers and retail workers safe, as have many more as they navigate post-lockdown ways of working. The solutions implemented have help bring some much-needed confidence, and footfall, back to the sector. Plastic screens and sanitising stations are now commonplace in most retail stores from the high-street to supermarkets. One-way systems and spaced-out till points are also a more familiar sight, as are more ‘self-serve’ tills. Perhaps an unexpected evidence of progress lies with app development on smart devices, with customers now able to have greater freedoms to self-serve without needing to complete the traditional check-out process or undertake unnecessary human contact. Data is being freely shared in the pursuit of speed and convenience, helping brands build up a richness of data never before seen.
The change of pace many consumers have experienced as a result of lockdown has also led to an increase in sales in some unexpected areas. DIY and garden centres are widely reported to have experienced a surge in sales with Kingfisher Group reporting like-for-like sales up 21% in the summer months. After a slow start as a result of fulfilment issues, toy stores and specialist hobby retailers have also benefitted from a shift in buyer behaviour as school closures meant children needed entertaining, and quickly.
Interestingly, subscription boxes have also gained an increased following with around two in five consumers now signed up to a new subscription since the pandemic began. That means over 55% of the population now has a subscription which is up nearly 10% year on year. Such is the popularity that meal kit service Gousto is creating over 1,000 jobs having delivered five million meals in June, a jump from 2.5 million in January 2020. It provides an interesting model for fashion retailers to follow with ease of budgeting, convenience and driving routine online behaviours all in its favour.
A slow return to normal
For many though, going into the second half of this year has brought with it a much more cautious return to business. Many consumers are still fearful of, or no longer interested in, returning to old buying habits. Behaviours that were already changing within the sector have transformed further and are now less predictable than ever.
As employees continue to embrace more flexible working and working from home, it’s having a very real impact on those retailers who rely on the spend of city-workers. Food outlets and those that benefit from habitual purchases are particularly impacted, with more job losses and store closures on the cards. There are many small and independent businesses who rely on regular cashflow and spontaneous purchasing that have a difficult journey ahead of them, all adding to the changing dynamic of not just city centres but also more suburban shopping areas.
For the industry as a whole, the entire concept of shopping is being redefined. Business models that should make sense simply don’t anymore and growth plans based on expected buyer behaviour no longer stack up. The impact of the pandemic on buyer behaviour has been colossal; but with change comes great opportunity.
Online Sales Growing
Already on a positive growth trajectory, online retail has experienced a significant boom with online sales up almost 50% up on pre-pandemic levels. As lockdown forced consumers to make a channel shift, many have found they are more comfortable with this than expected and so the behaviour has taken hold. For many brands, this is not before time.
In recent years, aware of the growth potential, many retailers have been investing heavily in their online offering. While front-end websites and ecommerce platforms have been upgraded, the logistics network needed to ensure order fulfilment have stabilised to ensure consistency of customer service. As lockdown measures were imposed and city-centres ground to a halt, it is these brands who dominated the battle for consumer spend; we may have been in lockdown but there was still no desire to wait more than a few days for home delivery!
Our take on post-Covid retail
Whilst the global pandemic continues to cause havoc with economies worldwide, the British high street and UK retailers continue to face into unchartered territory. Unemployment is rising, disposable income is decreasing and fewer consumers than ever are prepared to leave the house to undertake anything other than essential shopping.
In this new series, we’ll continue to look at the future of retail as the sector continues to navigate the many complexities of transformation and recovery. We’ll be looking at the changing nature of consumers and how this is redefining the retail experience; we will also delve into the elements of consumer and commercial strategies needed to survive the current crisis and explore what this could leave the sector looking like as is settles into a new normal.
The tough start has turned into a tough year but for an industry already embracing change, this is nothing new. Innovation is being delivered at page, agile thinking dominates decisions and brands are paying more attention than ever to the wants and needs of their customers. There is no sector more ready to embrace transformation than retail.
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