With the UK in lockdown, the coronavirus (COVID-19) pandemic is having a profound impact on the retail industry. The British high street was already in a relatively weak position before the health crisis, but as consumers stay home and turn to online shopping, analysts have warned that e-commerce may be stepped up at a faster rate than previous projections.
As the world’s economy is effectively shut down, British retailers are at their most pessimistic since the financial crisis in 2008, according to a CBI survey. The CBI showed that the retail sales index dropped to -3% in March from +1% in February, while the expected sales volume for next month is -26%, the lowest since April 2009.
Due to COVID-19 containment measures, the shopping streets are empty and the future of the high street has never been so uncertain. Even though grocers are seeing a surge in demand due to consumers stocking up on essentials, many other retailers “are seriously suffering as households put off non-essential purchases and social distancing keeps people away from the high street”, CBI economist Ben Jones said in a statement.
While British multinational fashion and homeware company Next PLC warned of a significant downturn in the coming year, smaller retailers like Shoe Spa try to remain positive. “We think it is very important to be creative, and businesses must find new ways of meeting customers' needs during this difficult time otherwise they can face closure,” says CEO Paul Kaniuk. “We do hope that the government will come with more initiatives to help businesses thrive in these volatile times.”
So far, the UK government has said retailers can still trade online and has launched various schemes to help business owners, including offering cash grants and the suspension of business rates. “I feel very positive that the government is realising that the high street is in crisis and that this could send it over the edge,” says Georgina Hustler, owner of Antique Rose, a small gift shop in Wokingham, Berkshire.
Short term, the disruption to the retail sector is set to be extremely damaging, as billions of lost revenues immediately hit vulnerable retail with no e-commerce to rely on. “Those retailers with no online presence are simply going to go out of business because they're not going to be able to respond,” says Adam Hadley, retail analyst and CEO of QuantSpark.
As consumers are ordered to stay home, analysts have predicted that there will be an upsurge in e-commerce, with this change in behaviour outlasting the crisis. “A lot of high street retail was struggling before this because what we've seen in the market is the consumer’s interest shifting to online,” says Hadley. “The coronavirus crisis has accelerated the trend and maybe moved it forward by as many as five years.”
The change in consumer behaviour caused by these extraordinary circumstances may imply a long-term shift in shopping habits. “By the end of this crisis, people who have discovered services, shops and product lines online they never would have thought of before will be more likely to make future purchases in the same manner,” says Hadley.
Next PLC is one of the many big retail companies acknowledging this change. “Our sector continues to experience profound and lasting structural changes. Indeed it is possible that the pandemic may accelerate the transition to online shopping. So we cannot afford to neglect our continuing efforts to transform every part of our business,” a spokesperson for the company said.
But could it go the other way? “I would argue that if people are being cooped up in their houses and have not had the opportunity to go out to shop, they might realise they don't want to shop online and appreciate the high street more because they’ve had it taken away,” says Hustler.
For a struggling high street, the accelerated digital disruption might become one of its toughest challenges yet. 2019 was a tumultuous year for the retail industry, partly due to Brexit uncertainty. There were over 2,800 store closures in the first half of the year alone and 140,000 jobs were lost, according to the Centre for Retail Research. Meanwhile, online spending in the retail sector is almost reaching 20%.
Despite these figures, Hustler’s small retail business has seen growth in the last 12 months. “I've seen an increase in people wanting to shop local, support small businesses and get a more personalised service,” she says. “With bigger retailers where you don't necessarily enjoy that shopping experience, people might think what’s the point?”
The rapid transition to online poses a challenge to physical retailers, but also an opportunity. “This will force physical retail to make difficult decisions which are actually in their best interests,” says Hadley. “Retailers who can adapt quickly enough and move ahead of consumer sentiment could actually become profitable.”
Despite the tragic devastation of the coronavirus, there is still hope that the revival of the high street could actually be encouraged on a hyperlocal level. “This could give some fresh life into local retailers, as it provides an incentive for them to invest in online delivery, a better website and a newsletter to engage with the local community,” says Hadley.
As online shopping increases in the coming years, Hustler says that the way to survive in the high street as a local business is to have a professional online website. “It’s tougher than it was 10 years ago, we now have to put a lot more effort into every pound and an online shop gives you credibility.”
As the circumstances are continuously changing, these issues are expected to be dealt with on a rolling basis. “With retailers taking each day as it comes, it’s difficult to say what the new commonplace will be for the sector in the coming weeks or months,” says Kaniuk.