UK Retailers Reopening to a Questionable Future

23 Jun, 2020 . 4 minutes

Retailers in the UK say they may see some relief following Prime Minister Boris Johnson’s easing of lockdown restrictions June 15 in a bid to help the economy.

The relaxations apply to high-street and non-essential retailers. However, social-distancing regulations remain in place. Public houses, cafes and restaurants are closed until July 4. Customers may return but retail and business analysts argue that, compared with e-commerce, the prospects for brick-and-mortar retailers remain bleak.

For fiscal 2021 retail sales will be under 20 percent compared with 2019, according to Deloitte UK. The Office for National Statistics (ONS) predicts an 18.1 percent drop in retail sales in April following a monthly fall of 5.2 percent from May. The ONS also reported that clothing sales in April fell 50.2 percent compared with a 34.9 percent fall in the previous month.

The British Retail Consortium, a trade association representing high-street stores, said the lockdown cost nonfood shops £1.8 billion in lost sales each week. Many retailers won't recover, it said.

Overall retail trade declined 8.9 percent in the first quarter - resulting in a 20.4 percent fall in gross domestic product for the period, according to ONS. Meanwhile, the same report showed a record rise in online spending - up 30.7 percent in April compared with a 19.1 percent rise reported in April last year.

Deloitte's analysis shows 46 percent of consumers are willing to support local businesses. But with the fall in customer numbers and the growth in e-commerce, its analysts aren't convinced high-street retailers and department stores will see the business return to pre-virus volumes.

Nevertheless, hundreds of shop owners, especially clothing, remain optimistic. Customers queued up to shop June 15 and the Daily Mail hailed it “Manic Monday”. The number of shoppers recorded June 15 was 40 percent greater than the previous week, according to research company Springboard. Nevertheless, the numbers were considerably fewer than in the same period last year, it said.

Many shop owners expect a steady recovery in customers after the reopening. Store owners on Marylebone High Street in central London, for instance, are seeing an increase in business, they say. But shoppers remain scarce, they added. Many shops delayed reopening and others have already closed permanently. Around 1,500 stores in the UK closed down in the first five months of this year - resulting in the loss of about 40,000 jobs, according to a Center for Retail Research report.

Nearly one-fifth of SMEs, including retailers, wouldn't survive without “considerable incentives”, according to an April statement from the Corporate Finance Network, an association of accountancy companies and business advisors working for small- and medium-sized enterprises and owner-managed businesses. At least 250,000 acquisition deals with SME businesses have to be facilitated since April to safeguard the national economy and almost 4 million jobs, it said.

Simply reopening or giving shops a facelift can't help when shopping habits are changing so dramatically, the experts say. Without experience in e-commerce retailers will need acceleration plans, rescue packages or government backing to rebuild their long-term cost structures. Owners must dare to “turn their operations inside out” to survive in the face of the digital invasion, according to retail consultant Fujitsu.

After Covid-19 the future of retailing isn't as promising as e-commerce because customer behaviour is shifting to digital buying. This new shopping habit has created the biggest rise in online spending on food, for example. These sales increased 9.3 percent in April compared with a 5.7 percent rise in March, according to ONS figures.

Although sales at clothing retailers fell 14.5 percent in April online sales grew 46.4 percent month on month in April, according to ONS figures. Their online sales had risen 26.6 percent in March.

The market for nonessential stores has been overtaken by online shopping since the lockdown. Unless they are digitally creative clothing businesses will struggle the most because traditional promotional sales events seem unlikely with restrictions on social activity, said innovator consulting company SOTI. Events like the London Fashion Week are being replaced with digital-only platforms. The same is happening in Paris and Milan and in the United Arab Emirates.

Brands and clothing lines with an online presence will adapt quickly, according to independent economics research consultant Retail Economics. It said in May the online shift had pushed retailers with the most e-commerce experience to accelerate digital transformations. Manchester-based online fashion retailer aimed at 16-year-olds to 30-year-olds is among those getting results from expanded digital campaigns. For the three months ended May 31 total group revenue increased 45 percent to £367.8 million with gross profit up 42 percent to £125 million and earnings before interest, taxes, depreciation and amortization of 50 percent greater than last year, announced by the company

Meanwhile, in China retailers are mixing e-commerce with live streaming and social-media buying. More than 10,000 retail stores used New York Stock Exchange-listed e-commerce, retail, internet, and technology company Alibaba Group Holding’s Taobao Live to promote their products - generating 5.1 billion yuan (£579.1 million) in transactions on the first day of the country's mid-year shopping festival in June.

While the UK’s lifting of restrictions may allow retailers to regain some momentum it isn't enough to help retailers rebound, according to the experts. Shoppers have become accustomed to online buying, they say. Experts are divided if shop owners remain open and hope for the best or take a leap of faith and go digital.

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