England being in lockdown for the second time is a big deal.
For starters, the country is home to around 85 per cent of the UK’s total population and the spending power that comes with that. With that in mind, the latest lockdown is set to have a huge impact on the most crucial, busiest quarter in the annual retail calendar – not just for England, but for the whole of the UK.
It’s no secret by now that the Covid-19 pandemic has hammered the UK’s retail industry, forced a dramatic shift in consumer spending habits, and impacted the lives of those in the retail workforce. The has pandemic also prompted several high street chains to file for administration, while many others have undergone job cuts by way of restructures or CVAs.
With the rise in Black Friday and dominance of Christmas, this “golden quarter” is when retailers – including small and independent retailers – often make huge strides in revenues and profitability. And with Wales just exiting a 17-day firebreak shutdown and England to endure at least another three weeks of lockdown, it’s now uncertain whether the golden quarter will provide the usual opportunity to offset any losses made during the year. Especially this year, given the UK-wide, three-month long lockdown during the spring.
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Small and independent retailers suffered during the first lockdown, with the average business losing almost £12,000 amid the the height of the pandemic. After many were beginning to show some signs of recovery ahead of the Christmas trading period, what can they learn from the first lockdown in order to survive the second shutdown in England?
“Retailers that did not anticipate the impact of lockdown on their businesses and were not able to adapt quick enough will likely have experienced losses,” explained Piperis Filippaios, managing director of the growth specialists Digitalbeans.
“We saw two characteristics among retailers that were either able to maintain, or even grow their level of business during the first lockdown: their ability to adapt their business model quickly, and their ability to shift online.
“The most successful retailers did both.
“We are coming into a period of more doom and gloom for retailers”
Retail intelligence firm Springboard recently forecast that UK shopping destinations will see overall footfall for the six weeks to Boxing Day plunge by 62 per cent compared to the same period last year. The government has also not yet ruled out the possibility of an extension to the English lockdown, which could pose further problems for all retailers – especially smaller ones.
Simon Geale, senior vice president at Proxima, said: “We are coming into a period of more doom and gloom for retailers.”
“With the vast majority of retailers still reeling from the spring/summer lockdown, the timing is devastating, if not wholly unexpected.
“We know that we are entering into the most crucial trading period in the calendar, and let’s be clear, a lot of retailers won’t make it through to spring next year.
“However, we have already seen many small independent retailers learn from the first lockdown.
“They have been a lot more proactive in informing their customers of how to interact with them over the coming weeks.
“Although consumers were planning to spend less over the Christmas period, they were forecast to spend a higher proportion of this in local shops.
“Maintaining some form of promotional dialogue and attempting to salvage some of this market share is therefore key for smaller retailers to survive this period.
“We expect retailers to keep marketing, and attempt to ensure they have as many open channels as possible. We know what to expect from a lockdown now, so retailers will have to fight for share of wallet.
“With the first lockdown, it was a case of ‘weathering the storm’ for smaller retailers rather than profiteering.
“Whilst the second lockdown will be increasingly difficult, they have come away with lessons in shifting their focus and effectively communicating with their customers.”
It’s arguable that for many independent retailers, their biggest rival is Amazon. The online retail giant experienced a spend of £10,000 per second on its products and services as hundreds of millions of customers turned to the ecommerce site during the first lockdown.
“The seller experience has worsened with Amazon implementing stricter rules”
However, David John of Loyalize said that instead of competing with them, many independent retailers – especially those that don’t have an online presence – quickly learned they needed to rely on Amazon as a channel to sell their products. He added that, according to a number of marketing surveys, when shoppers are thinking of buying an item, almost 50 per cent go straight to Amazon to search for it rather than Google or a retailer’s own site. Nonetheless, this can come with a hefty cost for independent retailers.
“Whilst independent sellers account for almost 50 per cent of sales on the site, they pay for it,” John told Retail Gazette.
“During the pandemic, the seller experience has worsened with Amazon implementing stricter rules about what could and could not be sold.
“Some sellers even saw all of their sales evaporite, whilst still paying monthly fees.
“What we have learned is that in times of crisis, a customer’s engagement with a brand can impact their sense of trust and loyalty.
“Now is the time for small businesses to look at how they can continue to communicate with their customer base and redesign parts of the customer journey (or shift to online) to keep their customers coming back.”
OnBuy chief executive Cas Paton agreed. “Many independent sellers have naturally been wary of selling through online marketplaces, simply because of the large fees which the major players demand which eat into their already small profit margins,” he said.
Geale offered an alternative perspective: “Smaller retailers must adapt quickly to save market share and stave off the ‘Amazon effect’
“As with all sectors, the pandemic has massively accelerated already emergent digital trends, and the digital shopping experience is one that consumers have become very familiar with.
“It is therefore essential that even smaller retailers and local shops enhance their digital offering and begin providing services such as ‘click and collect’ to their customers.
“As we have seen from earlier in the year, lockdowns are a huge opportunity for Amazon to gain market share on all competitors in the retail sector,” Geale continued.
“By deploying a different mindset, small business owners might find it preferable to consider how best to co-exist with Amazon and leverage the relationship to their advantage – ‘if you can’t beat them’, so goes the saying.
“It would be worthwhile to consider what consumers love and hate about the Amazon model and see how this synchronises to your business.”
Meanwhile, Filippaios warned that independent and small retailers in England that rely on high streets and shopping centres would “really struggle” during the second lockdown.
“Retailers that rely solely on a bricks and mortar presence will struggle through this second lockdown”
“Not least due to its timing, hitting just as footfall was starting to increase thanks to a return in consumer confidence and the Christmas shopping season,” she explained.
“Retailers were planning for strong November sales to end the year on a high, and had built up their range of products and increased stock levels.
“As a result, many small businesses are highly leveraged right now and unless they can make up the sales in December, their future is in jeopardy.”
Geale also expressed his concerns for smaller retailers without an online presence.
“Retailers that rely solely on a bricks and mortar presence will struggle through this second lockdown,” he said.
“Even if they can financially survive the barren trading period ahead and last until spring, they will increasingly find their market share eaten up by their more digitally savvy competitors.
“Communication with customers will remain a key element to surviving on a physical presence alone.
“Smaller high street shops will have to really encourage their customers back onto the high street with an experience that rewards the trip.”
John said that a quarter of small retailers did not survive the first lockdown. He cited the British Independent Retailers Association’s data that warned England’s second lockdown could “decimate” the independent retail sector.
“As we enter what is typically the most profitable time of year for many retailers, there is a real concern that this second lockdown will steer them towards the end of the road,” he explained.
“For some who have managed to ride the storm however, lockdown 2 may be slightly easier to navigate than the first time round.
“With lower operating costs and strong government support (including furlough being available from day one), smaller businesses have become more agile in adapting to the changing conditions.
“Different rules regarding non-essential shops being able to offer both delivery and click-and-collect has also allowed smaller businesses to be more flexible in how they reach their customers, where earlier this year there was no alternative.”
A survey by Vouchercodes.co.uk before the second lockdown predicted that one third of all Christmas spending would take place online this year, with shoppers spending £5.6 billion more on ecommerce than this time last year.
“This stresses the importance of small businesses finding an online presence to reach their customers,” John said.
“Without it, lockdown 2.0 is forecast to cost around £2 billion per week.”
With these figures in mind, Geale argued that the pandemic has proved that all independent retailers should invest in trading online.
“The acceleration of the digital shopping experience was inevitable, but the pandemic has rapidly accelerated this,” he said.
“In the mid-term, all retailers will need to become ‘etailers’ and learn to create a virtual experience that is new and exciting for consumers, directly competing against the online giants.
“This will require investment, waste being cut, and the restructuring of both business models and supply chains to suit this next generation model.
“Digital platforms are here to stay, and retailers will need to invest in them if they are to compete with larger retailers and survive the changing retail landscape.”