The biggest retail story of 2020 – and indeed for every individual and every business worldwide – is Covid-19. We were all expecting it to be Brexit when we began the year but there is absolutely no doubt that the pandemic and the response to it has had a dramatic effect on retail.
The impact for us, as a pure-play online retailer, has been one of accelerated growth. It was something that was happening anyway but the national lockdown in the spring led to a channel shift into ecommerce retailing, not just in the flooring market but across every kind of retail.
You can see the evidence of that trend more widely when you look at the fact that the percentage of retail spend online in the UK just before lockdown was bang on 20 per cent. When we hit May and June, it jumped to 33-34 per cent and then gradually came back down to around 27 per cent – but that is still a big increase on pre-lockdown sales.
“Covid-19 has brought about a five to six-year shift towards online retail in a matter of just a few months”
In my view, Covid-19 has brought about a five to six-year shift, maybe even more, towards online retail in a matter of just a few months. Internet retail was growing previously at around 1.5 per cent every year and now the sector is projected to finish 2020 with online sales at around 30 per cent for the year.
The projections for online spend in 2021 is around 27 per cent and that is if we are Covid-free and there are no lockdowns. So, the retail sector is going to come out of this with a channel-shift that would have taken five or six years without the impact of the pandemic.
That shift was happening anyway, it was just the speed of change that has been impacted.
For us here at UK Flooring Direct, there was a big increase in people visiting our website and from day one, a big increase in sales. In the first quarter of 2020, our sales were growing at around 25 per cent year-on-year but in the first couple of months of Covid-19 that really started to ramp up. From April onwards, we were growing at 70 per cent to 80 per cent year on year.
For our business, there was an additional draw for customers during 2020. More people were at home and they had limited choice on what they could do. Fewer people went on holiday and even fewer managed to go abroad. And, on a day-to-day basis, there have been less opportunities to go out for meals or for other leisure activities.
Therefore, there was a formula of people wanting to improve their home because they were spending more time there in the day. Despite the crisis, there was, for many, disposable income freed up by fewer holidays, meals out and even reduced use work journeys.
That made the home improvement market buoyant and we benefitted from that, but I think what the past year has shown is that it’s not a case of just putting any product on the web and it will sell. There is much more to it than that.
“The past year has shown is that it’s not a case of just putting any product on the web and it will sell”
Firstly, it is a matter of sourcing the right products and then getting the technology side of the business right in the way we market and the way we sell. It is constantly evolving. We launched a new website during the lockdown which is something that has been in development for two years and we continue to move forward with that. It’s ongoing.
Next year we will spend another £3.5 million on more technology advancements because it’s so important to us as a business and the way we interact with our customers.
Our marketing spend through digital probably ends up evening itself out on what we would spend on property if we were a high street retailer. The web is our shop window. It’s the same profit and loss ratios but it just works in different ways.
We’ve seen that the internet shopper has become much more discerning but this isn’t driven by Covid – it has been happening over the past two to three years. People do want the best prices but they are also buying by service now. They want information at their fingertips too, so if you take our example of flooring, customers want to know how it’s going to look in their home, they want to know the quality of the product and they want to know the price points.
They’re asking, how easy is it to install? How do I maintain it? How long will it last? Is it pet/child friendly? That information needs to be readily available to them because customers have so much power to self-inform now.
And they want it all next day because that’s what they are used to. Whether it’s an item of clothing or a big-ticket item like a new floor, they want it delivered quickly because that is just the expectation these days.
Again, the Covid-19 pandemic didn’t bring about this shift in mentality but it has certainly accelerated it.