While the UK retail industry enjoyed some respite after the three-and-a-half month nationwide lockdown was lifted in mid-June – and particularly after the boost from hospitality venues reopening in July – in recent weeks it has endured new lows.
Amidst the second wave of soaring Covid infections, Prime Minister Boris Johnson recently announced a second lockdown for England, starting tomorrow and lasting four weeks. This would overlap slightly with the 17-day firebreak lockdown currently happening in Wales, while Scotland and Northern Ireland continue have their own restrictions in place.
It’s no secret by now that the pandemic has not only triggered a deterioration on the UK’s retail industry. It has also forced a dramatic change in spending habits and impacted the lives of those in the retail workforce.
The has pandemic also prompted major retail chains like Oasis & Warehouse, Laura Ashley, Debenhams, BrightHouse and Cath Kidston to file for administration, while many others have undergone job cuts by way of restructures or CVAs.
The new lockdown in England could potentially be extended beyond the one month duration, although this is not certain yet. Either way, given England is home to around 85 per cent of the UK’s total population and the spending power that comes with that, the new lockdown would inevitably affect a huge chunk of the most crucial, busiest quarter in the annual retail calendar.
With the rise in Black Friday and dominance of Christmas, this “golden quarter” is when retailers often make huge strides in revenues and profitability. Yet it is now uncertain whether retailers can use the quarter as an opportunity to offset the losses made during the first UK-wide lockdown during the spring.
BRC insights director Kyle Monk said the forced closure of thousands of shops in England would cost non-essential retailers over £2 billion per week as the sector enters the all-important Christmas period.
“The first national lockdown saw a rise in spending in the days prior. We now expect many people to be picking up the items they desperately need before these shops are forced to close by government,” he told Retail Gazette.
“However, sales at these stores remain well below the pre-pandemic levels, and without clear and targeted government support, we will see many more shop closures and job losses in the coming months.
“This is despite a recent Sage paper reporting that closing non-essential retail would have minimal impact on the transmission of Covid.”
Closed physical spaces mean retailers would need to rely entirely on their online channels to drive sales at a crucial time. If retailers didn’t implement a suitable ecommerce option during the first lockdown, they are at risk of falling significantly behind those who did.
An effective online presence is also essential for retailers to be able to respond quickly to changes in demand, scale up capacity, and adapt their digital offering to cope with unplanned peaks.
While questions have been raised around Primark’s complete lack of offering an online channel, the retailer had previously made it clear that any strategic decision to open an online channel should not just be its reaction to this global health crisis.
Primark owner AB Foods said on Monday that it expects to take a £375 million hit from the loss of sales amid the latest lockdown, and England is home to the majority of its store estate in the UK. Despite this, AB Foods chief executive George Weston said Primark had traded well since stores reopened after the first lockdown, with £2 billion of sales to September 12.
“What we’ve seen with Primark is when people are able to shop they prefer to shop with us than do so online,” he said.
Meanwhile, essential retailers such as grocers are arguably more prepared for a second lockdown. Many have teamed up with delivery services and reinstated door marshals to ensure customers wore face coverings and stores were not over-filled.
Stockpiling became a major issue during the first lockdown, as grocers witnessed consumers panic-buying staple products such as tinned and long-lasting foods as well as toilet rolls. Since then, many grocers have improved their supply chain capabilities, sourcing and resilience as well as offer more delivery slots. All of this has allowed them to be much better positioned to cope with unexpected surges in demand.
Most recently, Marks & Spencer rolled out its Sparks “Book & Shop” online reservation service, which allows customers to use its website to book a guaranteed slot to shop at their local store that sells food and grocery – removing the need to queue.
The Book & Shop service is available for use at 566 M&S food halls and larger M&S stores containing food halls and M&S said it was committed to controlling and limiting the number of customers in store to ensure social distancing can be maintained.
“With winter ahead, we know customers are increasingly concerned about queuing, so in response, we wanted to deliver a quick, digital solution to help them shop,” M&S stores director Helen Milford said.
Meanwhile, Tesco’s new chief executive Ken Murphy, who took over the helm from Dave Lewis last month, said the “massive shift online” would be “maintained for the foreseeable future”.
His comments came after Tesco’s online operation grew by a colossal 90 per cent across the three months to the end of August. In addition, online food sales rose from accounting for nine per cent of Tesco’s total sales before the pandemic, to 16 per cent.
According to booking tool Q Manager founder Sabrina Benjamin though, the second lockdown will not do any favours for non-essential retailers.
“Most retailers see the highest volumes of sales in the run up to Christmas,” she told Retail Gazette.
“Having a lockdown will certainly have an impact to sales.
“It is critical for retailers to improve their online channels and distribution so it has the ability to manage expected demand.”
Rick Smith, managing director of business consultancy firm Forbes Burton, agreed. He said the lockdown was going to be another blow for non-essential traders who were only just starting to rediscover some sense of normality.
“Larger retailers will already have an online presence that may need improving, whereas smaller retailers could struggle to catch up,” he said.
“The key problem for smaller retailers will be procurement and distribution. The lockdown isn’t supposed to affect these people as they can still go to work, but it may slow down their supply chains and impact on how quickly they can get products to their customers.
“If non-essential retailers are able to reopen in December as planned, there will undoubtedly be a rush of shoppers looking to buy Christmas gifts.
“There will also be a lot of people reluctant to go to the high street, so retailers will need to come up with ways to incentivise a trip to the shops.”
With England now headed back into a national lockdown, non-essential retailers will once again have to pivot their approach to customer engagement for the foreseeable future.
Rather than going backwards, they will have grown from the experience of the first wave and have arguably put their knowledge into action. Accelerating their digital transformation and utilising technology to meet the demands of a new contactless society is a new necessity.
It is going to be a competitive market and to ensure customers don’t shop elsewhere, retailers would need to perfect their ecommerce channels. Ultimately, those who respond quickly to changing demands are the ones who will remain competitive in the months to come.
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