As UK retail re-opens we are pleased to present new research from global law firm, Squire Patton Boggs, and economics consultancy firm, Retail Economics. Our Unlocking UK Retail report reveals the severity of the coronavirus pandemic on the retail sector.
- Over three-quarters (76%) of retailers suggested COVID-19 has had a significant negative impact on their sales, while only 14% said it had a small negative impact.
- 80% of retailers are considering redundancies as stores begin to reopen as part of a range of cost saving measures.
- Retailers are intensely focused on preserving cash and cutting costs where possible. Just under half of non-food retailers surveyed are considering store closures as part of these measures.
- The impact of COVID-19 will re-wire the customer journey and retailers will need to pivot their business models to align to new realities. As a result, they are taking a forensic look at their cost base which also include lease renegotiations (68%), review of supply contracts (63%) and investing in online operations (42%).
- Government measures to support the industry have been a lifeline for many retailers. Almost 9 in 10 retailers have taken up the Coronavirus Job Retention Scheme (89%), while deferral of VAT payments was also taken up by 68% of those surveyed.
- Almost half of all consumers surveyed said that safety was the most important factor when and whether to head back in-store.
- As restrictions are eased, consumers have indicated that limiting the number of people in stores (56%) is the most important measure that would make them more comfortable.
- Clothing, Footwear and Health and Beauty are likely to face the toughest challenges for reopening.
Matthew Lewis, head of retail at Squire Patton Boggs says: “Not surprisingly the effects of COVID-19 have knocked the confidence of retailers and consumers and also retail employees. The impact will be felt for a number of years and the retail sector will not look the same.
Immediate attention needs to be focussed on the challenges of unlocking stores, seeking to ensure retailers build a culture of confidence for both employees and consumers, with health and safety as the priority. Whereas many may have previously considered health and safety to be a blocker, it is now the key as we head out of lockdown.
Leadership teams will need to have undertaken a comprehensive risk assessment and ensure their risk management strategies are flexible to deal with the changing demand of employees, consumers and Government guidance.
Retailers will continue to reassess their supply chains, the purpose of their stores and stress test their business continuity models as they seek to find a way out of this crisis in the best possible shape.”
Retail Economics chief executive Richard Lim says: “The survival of so many retailers will hinge on the success of reopening stores over the coming weeks and the pace at which consumers return.
“As the impact of COVID-19 re-wires the customer journey across some parts of the sector, retailers are assessing the implications and pre-empting a need to pivot business models quickly to align to these new realities.
We’ve already witnessed a significant shift towards online necessitated by the closure of non-essential retail stores. Many of these consumers are shopping for goods online for the first time, overcoming the barriers of setting up online accounts, entering payment details and gaining trust. It is inevitable that some of these behaviours will become sticky.
The new normal will involve a step-change in the proportion of online shopping and retailers are assessing what this means for the number of stores, where they should invest and the potential partnerships that could be formed.
But cost cutting will inevitably be high up the agenda of boardrooms across the UK. A hit to the sector will be inevitable and retailers are considering all the options they have at their disposal to cut costs quickly and preserve cash in the business. Cutting the number of stores and staff will be high up on the list. As we transition to a new normal, a more resilient sector will emerge.”
Consumer panel research was conducted across a nationally representative panel of 2,000 households between 20-25 May 2020.
Retail survey covered 21 large multiple retailers conducted between 24 May 2020 and 5 June 2020.