This year will perhaps go down as one of the most turbulent in the history of UK retail.
The challenges of the Covid-19 pandemic dominated the news cycle as the nation faced several lockdowns, the start of a recession and business restructures that led to permanent store closures and thousands of job losses.
The UK – and the world – simultaneously witnessed a rise of significant social movements such as the resurgence of Black Lives Matter, heightened support for the LGBTQ+ community, and a call for retailers to improve ethical business practices following the Leicester factory scandal.
Yet as the pandemic took its grip in in the UK in March, retail was brought to a standstill – and consumer attitudes shifted dramatically.
Just days before the UK-wide lockdown was announced on March 23, the government said introduced one-year business rates holiday for retailers, as well as the Coronavirus Job Retention Scheme. The latter covered 80 per cent of an employees’ wages – or up to a total of £2500 per month – in an effort to furlough workers and to stave off job cuts. The scheme was meant to expire at the end of October, but pressure on the Treasury prompted Chancellor Rishi Sunak to extend it until March.
Meanwhile, safety measures that have never before been required – such as social distancing, controlled in-store shopper numbers and perspex screens – were rolled out by retailers to protect customers, employees and suppliers.
Arguably, retailers that relied on a physical in-store presence before the pandemic have been hit the hardest, while for those with a strong online offering, it increased pressure for them to trade ahead of competitors.
Covid-19 has also accelerated a decline in the UK high street that had been under pressure for some time, with Debenhams, Philip Day’s Edinburgh Woollen Mill Group (EWM Group) and Sir Philip Green’s Arcadia Group retail empire just a few examples of the retailers falling into administration this year.
EWM Group’s problems were imminent at the start of 2020 when it made around 100 redundancies across head office and business function roles. By autumn, two of its retail chains Ponden Home and the eponymous Edinburgh Woollen Mill fell into administration after facing increased competition from the likes of The Range, B&M, and Home Bargains.
Arcadia Group, which owns Topshop, Dorothy Perkins, Wallis, Burton and Evans, became a victim of its own successes despite its legacy position as a market leader in fashion retail, while Debenhams was arguably slow to transform and simply had too many stores on the high street.
Nevertheless, Mike Ashley grabbed headlines when his Frasers Group retail empire emerged as one of the suitors in talks about a possible £200 million rescue deal for Debenhams.
Ashley went on to revive his interest in taking over Debenhams after JD Sports withdrew from exclusive acquisition talks at the start of December, placing the 242-year-old department store chain on the verge of liquidation.
JD Sports’ withdrawal was partly linked to the administration of Arcadia, which is the biggest operator of concessions in Debenhams stores.
On the flipside, 2020 was also perhaps the year of retail acquisitions.
In June, Boohoo Group acquired the intellectual property of Oasis and Warehouse in a £5.2 million deal. In August, Frasers Group rescued Dave Whelan’s DW Sports from administration in a £37 million deal.
In September, Next sealed a deal to snap up a majority stake in Victoria’s Secret’s struggling UK division. The Hut Group bolstered its beauty portfolio with the acquisition of luxury skincare brand Perricone MD.
In October, Poundland snapped up frozen food retailer Fulton Foods for an undisclosed sum, which will help launch a frozen and chilled food offer across 500 of its stores. And in November, Supreme was sold to Timberland owner VF Corp in a deal valued at £1.6 billion.
Most recently, JD Sports announced the acquisition of American shoe retailer Shoe Palace in a £244 million deal to increase its exposure on the US west coast.
Over in the grocery world, Asda – owned by US retail giant Walmart for 21 years – officially became a British-owned retailer again in October after agreeing terms for a £6.8 billion sale of a majority stake to the billionaire Issa brothers, who own petrol forecourt firm EG Group.
Although 2019 was shown to be the worst year on record for UK retail, according to the BRC-KPMG Retail Sales Monitor. Overall retail sales dropped 0.1 per cent last year, compared with the 1.2 per cent growth in 2018. It is not yet known as to what data the BRC and KPMG would publish regarding 2020.
This year started off with trade talks around Brexit, while the rest of the year was dominated by the pandemic. The removal of tax-free shopping for international visitors also caused a stir, and it now appears likely that the UK will end the year leaving the EU, possibly with no deal – although trade talks were still ongoing at the time of print.
A BRC spokesman told Retail Gazette that retailers have suffered significant disruption from forced lockdowns and low footfall, plaguing towns and city centres.
“Hospitality collapsed as a lot of people were eating at home more often out of forced lockdowns and fear,” he said.
“Many retailers have tried to address this issue by increasing their online presence, such as introducing click-and-collect.
“Retail is still dominated by in-store shopping, so many retailers had to adapt to deal with both safety measures and a huge cost.
“Retailers and landlords have had a tough relationship this year”
“They’ve had to implement new systems to protect staff, which has really shown the strength and the flexibility of the retail industry this year.”
He added that the retailers with an already-strong online presence have weathered the storm better than others.
Many struggling retailers that were once at the heart of the high street, have arguably failed to keep up with the new generation of digital-first online retailers like Boohoo, Asos, and PrettyLittleThing. Especially this year, as the shift to online shopping accelerated as people were told to stay and/or work from home. And retailers that adapted quickly to introduce more online services this year have been rewarded for their efforts.
“In November, the online penetration of non-food sales went up from 33.2 per cent to nearly double 59.3 per cent,” the BRC said.
“This online trend that has been existing already is accelerating under Covid-19, and I suspect a lot of that trend will stick around even if shopping returned to normal.
“Both in-store and online will continue to play an important part in people’s retail purchases.”
The BRC spokesman added that although consumers can gain confidence through the immense amount of safety measures, they can also be encouraged to visit stores by what’s on offer.
“An interesting shopping experience can encourage footfall – which was seen in retail in 2019 – but Covid-19 has made it difficult for retailers to come up with innovative ways of creating experiences, particularly by keeping in line with social distancing regulations,” he said.
Boxpark chief executive Roger Wade said soaring business rates was another huge topic this year.
“Recent research showed that UK retailers paid just 13 per cent of rent they owed for the latest quarter, as high streets came under growing pressure in the face of a second lockdown and new set of Covid-19 restrictions,” he told Retail Gazette.
“Retailers and landlords have had a tough relationship this year, and long leases with upward-only rents are not the solution in this current economic climate.
“Landlords should shift towards turnover-based rent. At Boxpark, we are offering turnover rent to our tenants to help them better manage the costs of staying open.”
He added that the closures seen at major retail outlets such as Arcadia and Debenhams would have a huge impact on the high street.
“As well as a huge number of job losses, these closures will affect people’s livelihoods and could spark a domino effect as footfall at small neighbouring shops plunges,” Wade explained.
He added that although online retailers were able to avoid store closures, they still had some of their own issues to face – such as supply barriers and keeping up with consumer demands.
Boxpark, which was founded in 2011 and has three locations in London, has faced the same challenges while also witnessing a host of new traders, retailers and pop-ups throughout the pandemic.
“2020 saw the rise and fall of fast fashion, and coronavirus sparked a sustainable fashion revolution”
“I firmly believe in the power of a physical store – in many ways, retail is like entertainment, you can’t replace the touch and feel with online shopping or virtual events,” Wade said.
London Designer Outlet (LDO) general manager Sue Shepherd agreed. She said that although the gap between physical and digital shopping has narrowed with most retailers adopting innovative multichannel approaches, there would always be a demand for bricks-and-mortar retail.
“Guests still want the experience of trying before buying, plus the social experience of meeting friends and family,” she told Retail Gazette.
“London Designer Outlet saw huge demand for bricks-and-mortar in the first weeks after the two re-openings.”
She said LDO would look to host live events and DJ sessions and work with emerging artists and music producers as part of its community commitment and support of local talent. She also highlighted how 2020 was a year defined by a fundamental shift in relationships between retailers and landlords.
“With the Landlord and Tenant Act struggling to keep pace in a rapidly changing world, new thinking has been needed to counter the pandemic, lockdowns and a retail sector that was evolving anyway, with proactive omni-channel strategies,” Shepherd said.
“Turnover-based rents, which have long been an integral part of the success of London Designer Outlet, are being seen by many retailers and landlords across the UK as the best route forward.
“Also, the focus must be for landlords and occupiers to strive towards common goals such as the overall appeal of a retail district.
“Increasingly, the focus is shifting towards more thought about the overall tenant mix. For example, the rent should reflect aspects such as the revenue potential of each retailer, their appeal in terms of the attracting footfall to the wider destination, how they can bring extra value – and therefore revenue – to neighbouring tenants.”
Nevertheless, the rise and rise of sustainability in retail and consumers’ increasing awareness and demands around it continued unabated this year, despite the response to the pandemic becoming the main – and at times sole – focus for retailers.
Although sustainability may have been the buzzword of 2019, retailers were arguably focused on limiting financial loss this year due to the impact of Covid-19. In fact, GlobalData predicted earlier this year that Covid-19 would put sustainability concerns on hold as retailers focused on the battle for survival.
However, sustainable supply chains became a huge concern. Many made it a necessity to reconfigure their supply chains following the Leicester factories modern slavery scandal over the summer.
Covid-19 inevitably exposed weaknesses in retailers’ supply chains that can be mitigated by diversifying sourcing, improving local supply and on-or-near shore manufacturing.
Boohoo grabbed headlines in July after being embroiled in controversy over allegations that its Leicester factory was paying garment workers as little as £3.50 an hour. The group, which owns the likes of Boohoo, PrettyLittleThing, Nasty Gal and Karen Millen, started off the year by posting a 44 per cent year-on-year sales rise to £473.7 million.
The online fashion retailer faced backlash as a result of the scandal and its performance took a downturn, but soon recovered once Boohoo pledged to investigate working conditions at the factory in question as well pledge to improve the firm’s supply chain.
With people locked down at home for weeks on end this year, attention was shifted towards crucial social issues, such as human rights, fair treatment of workers and cutting carbon emissions. These issues have regularly brought retailers into the media spotlight, as consumers increasingly scrutinise their response and stance on issues.
“2020 saw the rise and fall of fast fashion, and in many ways, coronavirus has sparked a sustainable fashion revolution,” wardrobe rental platform Hurr chief executive Victoria Prew said.
“Lockdown has taught us how to live simply and consumers will be more conscious than ever of their fashion footprint.
“Consumers are increasingly interested in sustainable fashion and looking for a smarter way to consume fashion.”
While sustainability may have been a concern for consumers, they have also expressed concern for independent retailers as well.
In fact, research commissioned by American Express, supporter of Small Business Saturday in early December, showed that seven in 10 Brits said they would visit local shops throughout the month, with an average spend of £169. Another 78 per cent of Brits have said they admire how local retailers have navigated Covid-19 and want to continue supporting them for the long term.
Following the pandemic’s grip in March, the government rolled out an £11 billion coronavirus support package for businesses – of which just nine per cent was paid to small firms. However. small businesses were allocated around £1 billion in grant funding schemes under the Small Business Grant Fund.
“This year, the corner shop, post office and grocery store have all been vital to providing essential supplies to those who have needed it the most,” Federation of Small Businesses national chair Mike Cherry told Retail Gazette.
“Small businesses are well and truly at the heart of our communities and over much of the past year, the valuable contribution that these firms make to local areas has been proven time and time again.”
British Independent Retailers Association chief executive Andrew Goodacre agreed. He added that according to its in-house surveys, consumers were looking to shop more locally.
“The evolution to omnichannel has been accelerated due to Covid,” he said.
“The retailers who can continue to connect with their customers and communities, especially in the more local areas, will continue to do well.”