Two years since Covid-19 landed - how is the retail sector coping?
The coronavirus pandemic was the tipping point for retailers in significant financial distress as it erased company cash flow and shopper footfall. The virus instigated economic uncertainty on an unprecedented scale, triggering retail businesses to operate in rescue mode. This involved fast-tracking the adoption of digital technology, relentlessly campaigning for the support of local vendors, and rapidly adapting to the overnight change in consumer needs.
As most Covid-19 restrictions have now been lifted, we assess how the retail industry is recovering from its losses and readjusting to a new era of trading.
Accelerating the adoption of digital technology
Retailers with online shopfronts were well equipped to continue trading throughout the coronavirus pandemic while non-essential retailers were instructed to close during the first lockdown.
Springboard’s annual review found that online retail sales averaged 29.4% in 2021, an increase on the 2020 average of 27.9%. During the third lockdown (January to March), online sales increased to 35.7% but fell back to 27.3% between April and December.
Online sales for clothing and footwear peaked at 57.4% during the third lockdown when only essential retail stores were open for business. Once all retail stores reopened, an online clothing and footwear sales dropped back to 26.6%.
As Covid-19 restrictions prohibited non-essential retailers from rolling up their shutters, embracing another route through which customers could be served was crucial. The coronavirus pandemic accelerated the adoption of digital business models by retail businesses to maintain customer access. This led to the growth of eCommerce sites and improved retailer accessibility.
Moving on, we assess the financial impact of the shift to working from home on retail.
Recuperating from the loss of retail spending by office workers
As the pandemic triggered working from home on a blanket scale, employers witnessed the efficiency of the arrangement first-hand, including the uplift in productivity and reduction in worker burnout. As such, a large proportion of businesses implemented flexible working as part of their long-term offering to employees.
Data from the Business Insights and Conditions Survey (BICS) shows:
- 24% of businesses intend to use increased homeworking as a permanent business model
- Nearly 40% of those currently homeworking thought they would spend the majority or all their time homeworking in the future
Office workers support countless retailers throughout the working day by ticking off their shopping lists before work, on lunches and after work. While the permanent shift to hybrid working and working from home contributes to a drop in shopper footfall, retailers must now find new ways to retain customers by investing in multiple customer touchpoints, such as social media and e-commerce.
In 2022 the average UK worker will work from home 20 per cent more (one day a week) compared to before the pandemic which will have huge consequences on the retail and hospitality industry.
A new study from the University of Sheffield calculated the long-term economic impact of Covid-19 on city centres and found that shopping centres stand to lose £3 billion in 2022 due to the shift towards working from home.
The retail sector shifted investment to alternative means of generating income, such as click and collect social media, and third-party sales. These channels bear great importance as the retail sector adapts to the change in consumer behaviour, including the drive to shop local.
Fuelling local vendors through retail purchases
As many small retail businesses crippled by Covid-19 restrictions found themselves battling cash flow problems, local communities across the UK took a stand to voice the precarious position of independent shops and small retailers.
Research conducted by Barclaycard Payments captured a positive outlook on shopping local throughout the pandemic.
- Almost two-thirds of shoppers chose to shop closer to home during the pandemic to support the local community
- Nine in ten Brits who shopped locally during the pandemic will continue to support smaller and independent businesses after restrictions end
In response to the pandemic, the government urged shoppers to participate in Shop Local Week to help local businesses rebuild from the coronavirus pandemic which sparked the #SupportLocal campaign across local councils.
The pandemic has had long-lasting effects on the retail industry, including changes to consumer behaviour while shoppers spend more time at home due to flexible working and ‘home-nesting’. McKinsey penned the term ‘home-nesting’, which refers to the pandemic-induced lifestyle of investing in one’s home to live a remotely managed life.
The future looks hopeful for the retail industry as businesses revive cash flow, overcome creditor pressures, and unlock new income streams.