Coronavirus: three potential long-term impacts on UK retail

By Gerry McAuley on April 16, 2020

It's safe to say that, coming into 2020, there was already a lot of doom and gloom surrounding the UK's retail sector.

Footfall declines, the periodic collapse of well-known names, and the perennial headlines bemoaning “the death of the high street.” However, I regularly find myself pointing out that as a sector, retail has still been growing; there are, as always, winners and losers.

In all of the ‘2020 retail predictions’ articles I read in December and January, though, I don’t recall much talk about the emergence of a global pandemic and unprecedented restrictions on day-to-day life. The latest data, sadly, does suggest that retail will decline this year.

Most of the retailers I’m speaking to are, quite rightly, mainly focusing on navigating the short-term challenges now associated with their daily operations. Business models are being rapidly altered. Long-term thinking and planning now seems like a luxury. And yet, it’s never been more important to consider the long-lasting impact these tumultuous times will have on retail as a whole. Those who do, and those who prepare well, will be in a better position to reap the rewards when the economy does begin to recover.

Here are three main ways in which I believe the UK retail landscape may be changed over the coming months…

1. Not all businesses will survive – but their brands might

We’ve already seen examples in ‘normal times’ of storied retail businesses going to the wall. The IP and brand equity of most retailers still holds value, even when their stores don’t. In many cases it’s cashflow, debt, long-standing property issues and legacy supply chains that hinder profitability, not a lack of brand loyalty. Toys “R” Us, Maplin, Coast and Karen Millen were all shuttered in the past two years, but have since been ‘relaunched’ as online-only businesses.

Those acquisitions were made based on two things: the strength of the purchased brand, and the digital capabilities of the acquirer. boohoo Group buying up Coast and Karen Millen made sense – they could trade using a much leaner model, integrate quickly with efficient digital systems, and find an addressable customer base in both their existing clients and those who still shopped at Coast or Karen Millen.

coronavirus uk retail impact - a move to more online-only stores?

I’m not alone in predicting that we’ll see a number of retail casualties this year – in fact, we’re already seeing the likes of Laura Ashley, Cath Kidston, Oasis and Warehouse being pushed into administration. However, I don’t think those closures will be terminal or permanent.

Those brands who have been bridging the gap between tech company and retailer will be in a position to capitalise on opportunities. We may well see big online players – as well as smaller, tech-savvy businesses like the new owners of Maplin – picking up strong brands with a cost base that currently prevents them from succeeding.

2. Retail back offices will change – as will the talent pool

Businesses of all stripes have had to rapidly adapt and move to remote working models. This will have been easier for some than others. Some of the e-commerce retailers I work with have even shifted their contact centres to an entirely distributed, home-based model within days.

A few people within retail have described this to me as a “genie out of the bottle” moment. The expectations of employees will not be the same again. After months with no commute, more time with family (albeit only those in your own home at present), and a greater ability to do ‘deep work’ undisturbed…will a 100% office-based approach really seem like the best way to operate?

In addition to potentially improving employee satisfaction and productivity, there’s another upside; your recruitment is no longer restricted to those within a commutable distance or those looking to relocate. You can access talent based further afield. Plus, all current employees now know how to work effectively with remote colleagues – increasing the likelihood of successful integration and onboarding of the new hire.

coronavirus retail impact – more working from home?

That’s not to say I think offices will disappear, or that a fully remote model is right for everyone – it clearly isn’t, in most cases. But, with a more flexible approach, retailers will be able to access and hire great individuals who ordinarily wouldn’t have considered working for them due to geographical distance. The likely knock-on is a continued growth in co-working spaces, as remote workers seek social interaction with peers from other businesses in the absence of an office.

Given that this crisis has also sadly caused a rise in unemployment, there’s sure to be plenty of talent around – wherever that may be. The best retailers will find ways to grab as much of it as possible.

3. The growth of online and home delivery will accelerate further

A recent survey by analyst firm Retail Economics found that two-thirds of shoppers said they had switched to purchasing products online that they have always previously purchased in-store. People who have always resisted e-commerce now simply have no choice – accelerating a change in expectations and behaviour that has been building for quite some time.

Online shopping has always been far more prevalent in younger generations than older ones. Typically, the older demographics have huge buying power. Suddenly, pure-play e-commerce retailers can access a share of the national wallet that they haven’t been able to previously. While the current conditions won’t remain the norm, Pandora’s box has been opened up for millions of people.

This, coupled inevitably with large numbers of store closures due to COVID-19’s economic impact, will surely shift consumer behaviours. The CEO of Slack, Stewart Butterfield, recently revealed that this crisis has accelerated the tech platform’s anticipated user growth by around 18 months, in just a couple of weeks. I suspect that we’ll see a similar shift in online uptake once physical stores fully reopen.

What does this mean for retailers?

In the short term, category and pre-existing cash reserves will have the biggest impact on who rises and who falls. Over a three to five year horizon post-crisis, a major defining factor will be the adaptability of a business to the shifts brought about by the lockdown.

To summarise, I think that those retailers who will thrive, not just survive, will do three things:

?‍? Accelerate their transition to digital-based business models and enhance their tech capabilities – buying up brands that could be successful with a better cost base

? Be open to the idea of flexible, remote working models and hire newly-available talent from across the UK

? Improve e-commerce and delivery capabilities to meet the changing needs, demands and expectations of their customers


The opinions in this piece are personal to the author and do not necessarily reflect the views of Peak.

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