Retail in lockdown

by Tim Denison
Business & Finance

Like many other sectors, retailing has never endured a more challenging year. Almost from the off the going got tough. Storms Ciara, Dennis and Jorge combined to make February the wettest on record, coinciding with the arrival of COVID-19 to batter retail sales and footfall. By early March, the falls on last year gave us a strong sense of the impending future. Non-essential shops in England, Scotland and Wales were then told to shut their doors to customers on 23 March 2020 by the Government. In Northern Ireland the call came 5 days later.

Online became the only sales channel available to such retailers. For those that did not have transactional websites, the impact was devastating. Sales at Primark, the popular fast-fashion clothing retailer, plummeted from £650 million per month to zero. For those that did operate online, the pace and investment to scale-up and slicken processes rocketed.

For 12 whole weeks all non-essential stores remained shut. When they were at last permitted to re-open, from 15 June, shoppers were reluctant to return immediately, despite the immense effort and well thought through steps retailers had taken to protect shoppers and staff alike. That week our tracking of footfall showed the number of shopping trips made to non-food stores was only a third of the year before.

The majority of people, quite understandably, preferred to put their safety first and had become accustomed to the convenience of shopping online. By July, 42% of non-food sales were still being made online, when a year before the proportion had been 30%.1 Over the summer, footfall slowly returned to the high street and by the first week in September it had recovered to two thirds of 2019 levels.2

Online shopping website on phone

By September 2020 footfall recovered to two-thirds of 2019 levels

Footfall in non-food stores 2020 vs 2019

Source
Ipsos Channel Performance

Base
A value of 100 was given to the level of footfall in UK non-food stores in September 2000. This chart illustrates the level of footfall relative to that point in time.

Sales at Primark, the popular fast-fashion clothing retailer, plummeted from £650 million per month to zero

But, then more local lockdowns, first in north-east and north-west England, then extending into central Scotland and Wales, together with a tightening of national restrictions threatened the recovery as the sector moved towards its busiest trading quarter. By the start of October, the year-on-year gap in footfall had widened again to – 40% and the sector was back licking its wounds. We estimate there has been a net loss of more than 10,500 chain store outlets in 2020. That is a lot of shops.

Shopping centres suffered the highest number of casualties because they had a higher proportion of fashion stores – the sub-sector most heavily hit by the pandemic. In footfall terms it has been city centres that have been most impacted. Concerns over using public transport, the loss of workers in city centre offices and the lack of tourists have all conspired against shops there. In London’s West End, for example, shopper numbers were still only a third of the year before in October, compared to stores in the metropolitan suburbs that had recovered to two thirds.

sorry we're closed sign on shop front

The re-closure of non-essential stores in England from 5 November for at least four weeks, however appropriate, is the last thing that retailers needed. It comes at a particularly important time of the year for retailers with the festive season fast approaching and Black Friday just around the corner, an eagerly awaited fixture on the retail calendar for the past decade. Ipsos Retail Performance had forecast that footfall during the week in which Black Friday falls (the week commencing 22 November), would be the busiest of the year in footfall terms, with predictions of it being even higher than the week before Christmas for the first time in history. This will not be the case now.

Since the first lockdown, retailers have known that they needed to invest in their online operational and marketing capabilities in order to be able to serve their customers remotely. The silver lining to the latest closures is that they have now scaled up and are more fit-for-purpose than ever to switch to selling online. They still face huge challenges though, particularly over fulfilment (both in terms of warehouse dispatch and home delivery services), which will struggle to meet the normal ramp-up of sales to Christmas. Even if stores are allowed to re-open in December, social distancing and safety measures will prevent stores from being able to serve the usual crowds seen at this time of year.

Our advice is to begin your shopping earlier this year and to spread it out over a few weeks rather than leave it to the last minute. The last thing families want, this year of all years, is to suffer disappointments from presents failing to arrive in time for Christmas, and the last thing retailers want is to let their customers down.

Despite the damage done to the sector this year, British retailers have shown how resilient, how responsive and how resourceful they can be when the going gets tough. Regretfully there have been some big name casualties, putting thousands of jobs at risk, but there are every year. Past experience tells us that some will be ultimately be saved, but that doesn’t help the anxiety of employees in the meantime. Generally speaking, the creativity and energy with which the sector has reshaped itself, realigned its direction and refocused its values is a credit to its adaptability. It is those that have been most resistant to change and to change quickly that have paid, or still risk paying the price.

As we said last year, there is not a fundamental problem with physical retail, people still enjoy it, but there is a problem with bad retailers. There will be many fewer of them after 2020.

Shopping centres suffered the highest number of casualties because they had a higher proportion of fashion stores

Tim Denison

Tim Denison

Director of Retail Intelligence

References

  1. BRC-KPMG Retail Sales Monitor
  2. Ipsos Retail Performance