What impact will lockdown restrictions have on the cyclical summer 2020 retail sector?
UK retail in 2020 is one of many industries still trying to unpick the riddle of the coronavirus pandemic. Since 23rd March, the UK has been in lockdown as the nation seeks to shield society’s most vulnerable from the deadly coronavirus and ensure the NHS has sufficient critical care facilities.
Although the signs are positive that the number of COVID-19 deaths and cases is beginning to fall, Chancellor of the Exchequer Rishi Sunak is now less confident of an immediate rebound for the UK economy.
With lockdown restrictions set to ease at the beginning of June and then July – in line with the government’s new roadmap towards a ‘new normal’ – the economy will take weeks if not months to get back to the levels. In the meantime, the face of UK retail in 2020 is changing.
Although it is difficult to say whether they are changing for the better, it’s possible that these new consumer shopping habits will be here to stay. Below are the key challenges facing the UK’s retailers big and small this summer.
Excess retail supply stock
Undoubtedly the biggest issue for retailers this summer will be dealing with surplus stock. The lockdown and the COVID-19 pandemic have put a spanner in people’s summer holiday plans, effectively cutting short the summer retail season. With physical stores closed on high streets, retailers are bracing themselves for eye-wateringly high SS20 write-offs.
The Times revealed that the period between March and June is worth £18 billion in retail sales. Once stores begin to open their doors in July – providing the science and the data permits it – retailers will have to get creative with clearing their stock at significant discounts.
A renewed focus on e-commerce
Traditionally, around 20% of the £55 billion in annual retail sales is generated online. It is almost certain that this figure will be exponentially bigger in 2020, as consumers seek the solace and safety of paying for goods online and receiving doorstep deliveries. An IMRG report found that e-commerce sales with British retailers soared by 22% year-on-year in the first week of April. Naturally, it poses an exciting opportunity for industries that lend themselves well to online sales like beauty (140%+) and electricals (90%+) but clothing saw a 20% year-on-year decline. It begs the question of whether consumers will choose to hang on to more of their garments in these unprecedented times.
Consumers are looking after number-one
One of the biggest new consumer trends during the coronavirus lockdown has been DIY, gardening and cooking, as more households seek to get to grips with their homes and maintain a healthier lifestyle. With work-life balances less stressful, more families are dedicating time to getting creative in the garden and the kitchen. It creates new gaps in the marketplace for retailers to fill.
The long-term future of the ‘high street’ is at serious risk
It is difficult to imagine how a socially distanced high street will look and feel. Essential retailers, bars, public houses and restaurants have all closed their doors to the public for over two months now. It begs the question as to what will be left of our high streets once restriction measures are eased. The problems on our high streets existed long before the arrival of COVID-19. Vacancy rates in big towns and cities have been as high as 24.3% in recent years. If e-commerce continues to show the way for health and safety, as well as convenience, high streets will simply need to evolve or die.