Guest analysis slot interview with Andy Burton on how he sees coronavirus affecting retail via Internet Retailing
InternetRetailing: What are you hearing about the challenges that retailers are facing from the coronavirus?
Andy Burton: Social distancing and government policy in the UK has significantly reduced footfall to retail stores. This has resulted in a major reduction in in-store revenues, leaving retailers facing immense pressure in regard to paying their fixed costs. All of this impacts cashflow, leaving very little capacity for investing in new activities. This is closely followed by those depending on China for supply of products where supply chains are being disrupted. Then there are those that sell into consumers in China where ebbing consumer confidence reduced demand.
The knock-on impact – in terms of threat to the sustainability of some retailers – has never been more acute and uncertain, particularly as the duration of this disturbance is still unclear.
In the UK the government has given some respite for retailers, with business rates being eased for the next 12 months. However, this is a small benefit compared to the cost impact of closed stores, which will only threaten more jobs the longer this pandemic last.
Conversely, this is a proof point for those that have invested in ecommerce to reach consumers through retail or direct to consumer. With mobile apps being a go-to route to engage with customers who are either in self isolation or are facing closed stores, many retailers and brands are experiencing dramatic online growth, compensating for some of the decline in in-store traffic.
We are seeing situations where the management of an online store is more akin to peak period trading behaviour where the performance of the site, the relevance of promotions, and the assurance of timely deliveries are all critically important. We are also seeing some retailers and brands go “all-in”, for example Sweaty Betty has voluntarily closed its stores temporarily. Sweaty Betty is keen to confirm its staff are being paid for this period, in addition to its customers having access to free delivery, regardless of the value of their basket.
Equally some businesses were unprepared for remote working, with insufficient technology in place, such as outdated laptops and poorly connected VPN’s, which further added to the short-term challenges.
One thing is sure, while we never want to go through another experience like this, retailers and brands will adapt and will consequently be ready to leverage full value from digital commerce capabilities going forward.
IR: How is shopper behaviour changing?
AB: The evolution of retail has always been driven by consumer behaviour. It is no surprise we have seen a surge in sales through websites and apps, starting with the obvious priorities of medicines, thermometers, groceries, but also freezers, additional monitors for laptops and even running machines. We are also noticing that some brands and retailers are realising peak trading levels in fashion apparel in key markets. So to capitalise on the consumers that would have otherwise visited a physical store, these brands and retailers are using their arsenal of promotions, digital engagement and assurances on delivery.
We are past the point where consumers find shopping on mobiles a challenge and actually this has become a norm. This may be because the demographic has changed, and that the pandemic is encouraging people that may once have preferred the social experience of visiting shops, to shop online through websites and apps.
Will shopping ever return to a pre-pandemic split? Who can tell, as the convenience, reliability and familiarisation will undoubtedly change consumers mindsets, there is potential that it could raise expectations of a physical store experience.
IR: Where do we go from here?
AB: This is a massive shock globally. No brand, retailer or consumer is immune from the impact. As such, this is a wake-up call for retailers who are witnessing the wholesale adaption of a generation of consumers to trust and rely upon digital channels more than ever before. We cannot undermine the challenge for retailers, the impact upon local communities, nor dismiss the important role of physical stores, but ultimately consumer choice and confidence will dictate the outcome.
Digital sales will be more critical and more significant as a percentage of sales for retailers, and I do not see this being diminished post-pandemic. Yes, people will be relieved to have the freedom to experience a physical shopping experience again when the pandemic wanes. But these same people will also have more experience, confidence and assurance about what they can achieve online and will therefore be open to new ways of shopping, through mobile apps and websites.
Retailers need to capitalise on their experience to drive their brand values, product proposition and ensure they invest in scalable, personalised and intuitive digital shopping capabilities. To weather the storms of change and to reach the widest possible consumer market from the convenience of their phone, it is critical retailers and brands adapt, and fast.