The last thing they needed?
COVID has boosted the culture of online shopping, potentially decimating the already struggling High Street and malls. A serious candidate for events with historical significance, this pandemic has increased and enhanced the use and awareness of online transactions, perhaps decreasing the time this seemingly unstoppable change in our buying habits takes to utterly dominate those habits. However, this need not be the case if traditional retail adapts and innovates, the economy improves and COVID soon subsides.
Just after the lockdown call, Amazon doubled its second quarter earnings compared to the same period last year and saw a 40% increase in sales year-on-year. Exceeding expectations and reaching personal records, the mammoth’s stock price shot up since spring and shows no signs of slowing down. According to Christopher Rossbach of J Stern & Co., ‘the business is now the key enabler for most of Western society during this crisis’.
At the other end, total retail sales in May fell by 5.9% compared to the previous year, the second highest recorded drop. Worse, retail has furloughed more employees than any other sector. This has proved a terrifying prospect, with thousands of job losses - those in John Lewis, Harrods and Arcadia Group amongst them. From the Guardian, ‘according to the data collected by the Centre for Retail Research, 2,123 stores operated by 38 large- and medium-sized retailers fell into administration in the first six months of this year. They employed 49,200 staff’. A new review from former Wickes, Focus and The Big Food Group Chief Executive, Bill Grimsey, also shows that 50% of retailers risk failing in a post-pandemic UK.
Quite like Amazon, UK online fashion retailer Boohoo is growing and has gained from the crisis, snapping up Oasis and Warehouse when they went into administration with a loss of 1,800 jobs.
The pandemic seems to have accelerated what was already plaguing traditional retail - losses due to big business online. We lost former giants like Mothercare to administration last year, of course, as it shut all 79 of its UK stores.
It’s not all doom and gloom, and the thirst for digital and distance provides new challenges and opportunities for traditional retail to survive and prosper. Many players like M&S need to use the power, capacity and capital they still have to invest in smooth deliveries of online and in-store shopping and distanced interactions. Indeed, one of the reasons why shops like Oasis failed was their poor online performance. Those still alive need to tap into the online domain before it is too late. They also need to realise the blend of enjoyment and convenience in shoppers easily able to physically browse without having to carry their purchases during their retail therapy - the buy in-store delivery method. To survive, shops should seriously consider offering free delivery and advertising and branding this method to no end (as well as reducing prices in general!). Shops might also need a fair dose of luck; New Look is presently seeking a three-year rent holiday.
In addition, while footfall in cities remains frighteningly low, research suggests that a substantial proportion of the population is eager to go local, supporting small business and shopping closer to home. 63% of shoppers want to support small business after lockdown. To further salivate potential small businesses and moves from the CBD, ‘out of town’ rents are also lower. Besides, we need to remember that the Corona chaos has only been with us for about six months. We live in a fickle world where things change fast - ‘normal’ might be back in another six months, or perhaps a ‘new normal’ (whatever that may mean).
Things are now gradually improving for retail. Where our money goes and how much of it will go come Christmas will be a key and interesting indicator of future prospects for the sector.