Tag Archives: Covid

Five positive signposts on the road to retail recovery in 2021

The data presented in nightly news broadcasts is a strange hybrid of bad news and good news. Of course, we have the all too familiar grim updates on hospitalisations and deaths as a result of covid. But we also now have a counter-narrative – the numbers of people vaccinated who can look forward to a fear-free life again. We may be in the midst of a lockdown, but hope is not only on the horizon but in front of our eyes and shortly to be in our arms. The best of times and the worst of times.

Retailers are also facing a mixture of challenging and hopeful data. The British Retail Consortium (BRC) recently revealed sales growth overall falling by 0.3% in a year dominated by the Covid-19 impact – the worst annual change since the BRC began collating figures in 1995. Yet this is hardly surprising, with the Government forcing retailers to close. Unlike in the midst of other recessions, we can be confident an unprecedented bounceback is looming. A recent KPMG/Ipsos study points to a sales growth of up to 3% for 2021, despite the huge challenges in the first two quarters. Indeed there are several signals that point to a swift route to recovery in 2021.

Weathered and tested

The resilience of retail has been a remarkable success story of 2020 in the face of continuing huge challenges. Throughout the pandemic, retail has been written off only to bounce back whenever it has been allowed to trade. This is evidenced by the figures for lockdown two. According to the ONS, the headline figure for retail sales volumes in November during the second lockdown were 3.8% lower than in October, ending six months of growth. However, the drop was smaller than analysts had expected and, remarkably, sales remained 2.6% above February’s level in the year to November. This was all the more impressive given lockdown forced many shops to close during the month.

Throughout the past 12 months, retailers have had to adapt their trading at short notice, whether closing altogether or introducing a variety of safety measures and still enticing customers to spend. They have also needed to embrace new ways of trading, from click and collect to virtual shop floors to having sales experts in call centres rather than in person. This experience and ability to weather these storms and still attract customers mean retailers will be in much better shape when the good times return.

A shot in the arm for consumer confidence

Retail has always needed and relied on a confident consumer to sustain itself. You feel hopeful about the future and you are more likely to splash out. Over the past few months, we have had a perfect storm of negativity. Daily charts showing exponential infection and death rates highlighting the problem now, with no end in sight creating a feeling of hopelessness. This has created a mental health crisis to add to the immediate public health crisis. However, just as the confidence has been sapped by one thing – the coronavirus, so the cure can be the vaccine – a literal shot in the arm for consumer confidence. Of course, millions have been negatively financially impacted by the crisis, but due to the furlough scheme, many have been protected in a way that hasn’t happened in previous recessions.

Indeed this was the analysis by a KPMG/Ipsos retail think tank, which said retail should be able to look to a brighter second half of 2021. Pent-up savings, demand, a more confident consumer and a successful vaccine roll out all point to a strong rebound. However, it also points to some consumer behaviours changing during the pandemic, with performance varying across different categories.

Retailers have embraced an omnichannel strategy

The pandemic has speeded up the adoption of an omnichannel strategy for many retailers that was probably overdue. Dunelm is a good case in point. Despite huge challenges in its retail estate, the company’s investment in the online channel has paid dividends. Despite all of Dunelm’s 174 stores in Britain being closed to customers, the company expects pre-tax profit for the first half of its financial year to be about £122m, up 33.9% on the previous year. This is due to the investment in online and the trend for home furnishing during the pandemic. Similarly, Dixons Carphone Warehouse announced pre-tax profits of £45m for the six months to 31 October with online sales up 145%. Those brands that have a strong online presence have been able to trade successfully and will benefit even further when their physical stores re-open. Particularly given the next key signal.

Pent-up demand for physical retail experience

Despite online retail’s undoubted increase of the share of the cake, reports of the death of physical retail have been greatly exaggerated. After each lockdown, there has been huge pent-up demand in evidence whenever shops have been allowed to operate. This is despite uniquely off-putting circumstances for consumers to venture out. While we are in the midst of a third lockdown, we know from the end of the second one that footfall increased by nearly 20% as determined consumers returned to stores. With increasing numbers being vaccinated, we can expect an even stronger rebound this time. I am really confident we will see an unprecedented retail re-emergence when the impact of max vaccination is felt. Even retailers like Primark, which recently revealed a £300m hit to profits, remain bullish. As Jason Bason, finance chief of its parent company Associated Foods, pointed out, when its shops had been open sales were only down 14% despite the restrictions. After all, if people are still wanting to venture out during a pandemic, we can be guaranteed they will flock to stores when we have the vaccines rolled out and no longer have to be scared of strangers. People miss the retail experience.

Capitalising on the new trend of ‘shopping with purpose’

One real trend we have seen during the pandemic is ‘shopping with purpose’. This is consumers wanting to make fewer journeys out, but when they do, not returning empty-handed. Our own analysis for the last trading period, December showed really healthy growth in conversion rates of 51%. This was due to pent-up demand and people returning to stores with a real purpose to buy. Again, the result of lockdown is to make the return to retail all the more profitable – something that can give retailers something to look forward to as we focus on getting through this difficult time. This particularly applies to categories like consumer electronics with higher ticket items and people less willing to buy online. The pandemic has underscored we may be less willing to venture out, but when we do we want to make it count.

While we are in the middle of a really difficult period it may be difficult to keep optimistic, but as we approach the end game of this crisis we can be sure that the public will want to celebrate their new-found freedoms. Retailers that have adopted the right strategies can benefit when good times return.

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Covid-19 is temporary, but attention to the environment must be permanent

The Drum Covoid is Temporary

We’re living in a society where we’re constantly encouraged to do ‘better for the planet’. And I don’t disagree. But we’re at a point of inflection when a lot of people don’t know what’s best for the planet. From fake news to real news – it’s information overload everywhere you turn.

Recycling your plastic should be simple, but that’s another article depending on where you live and which type of plastic it is. Buy more sustainable products. Shampoo in a block is great if you have the money to buy more expensive products.

And there’s the biggest conundrum for most people when we’re thinking about the environment and greenhouse gas emissions. If I order online for delivery am I burning more carbon than necessary? Or is it more environmentally friendly to go to the shops, buy a less environmentally friendly product but save the delivery van a journey? How we expect people to know the answer, when many of us in retail don’t know it, is beyond me! It’s all rather complicated.

The impact of FMCG

I read an interesting study from the American Chemical Society that looked into the estimated emissions created by UK sales of FMCG goods, typically low-priced toiletries, packaged foods and cleaning supplies. Although shoppers have traditionally bought these items at brick and mortar shops, online sales are increasing.

The study compared the carbon footprints of three different shopping practices: old fashioned ‘bricks and mortar’ shopping and the two main forms of e-commerce, bricks and clicks and pure play (which both have different supply chain configurations). Included in the three models were emissions from transport, warehouse storage, delivery and packaging.

The results showed that the total emmissions per item purchased from bricks and mortar retailers were higher than bricks and clicks vendors in 63% of cases, but lower than pure play in 81% of cases. It appears that more items are usually purchased from bricks and clicks retailers is used and this leads to a smaller carbon footprint per item than for the same shopping trip via a brick and mortar retailer. Another factor is, of course, that one van driver bringing multiple deliveries into one area will create fewer emissions than all those people driving to the shops.

The study made some clear but obvious recommendations for consumers for cutting emissions across all three shopping categories: walking, cycling and trip chaining for brick and mortar; and purchasing from a single retailer and bundling for bricks and clicks and for pure play online retailers. Importantly for pure play businesses – whose share of the FMCG category is on the increase – switching to electric cargo bikes could cut emissions by 26%.

I’ve tried to simplify what is actually a complex study, but it does highlight the dilemma and responsibility we have as consumers and retailers to the planet. In a recent online shopping survey we conducted among 2,000 consumers, 73% said they were concerned about the environmental impact of excessive packaging, 75% single use plastics and 42% multiple deliveries to one address. There is a clear will from consumers to want to do better for the planet but it’s far too complex for them to work out how. So, retailers, trade bodies and governments need to do more to educate consumers so they can make the right choices not just any choice.

Our current Covid-19 situation is only temporary, so my mantra as we come out of the other side of it is just to take a little more time to think before you shop.

To read the full article please visit The Drum.

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