A year ago today, non-essential retail closed in the first Covid-19 lockdown. Twelve months on, retail employs 67,000 fewer workers, according to Office for National Statistics (ONS) figures out today, while 1,355 retailers – including high street names from Debenhams to the Arcadia Group –were among the 8,205 UK companies that failed between March 2020 and January 2021, according to Business Rescue Expert.
Earlier this month, research from PwC and the Local Data Company (LDC) found that an average of 48 retail shops closed every day in 2020, as the UK lost a total – net of openings – of 9,877 chain stores. At the time, the LDC said that only 17% of shops had been considered essential and able to stay open in lockdowns.
The full extent to which non-essential stores have disappeared from high streets is not yet clear – especially since many are still closed in the third national lockdown.
UK ecommerce platform EKM has analysed ONS data to find that 36,295 retailers ceased trading during 2020 – 16% more than in the previous year. Of those, just 2%, or 907, were insolvent, while most were voluntary liquidations of solvent companies. EKM says that most retailers closing down had a high street presence, or were in categories that had fallen out of favour during the pandemic.
Antony Chesworth, chief executive of EKM, says: “Record numbers of shop owners are looking to take cash out of their businesses and cut their losses. In many cases these are people 10 years or more before retirement who are worried about how long the pandemic has dragged on and would rather not run up debts at this stage of their lives.”
“Despite the measures introduced by the government to support retailers many retail tenants are still not able to meet their rental obligations. Under the circumstances, many shop owners are happy to surrender their leases and cease trading, even in cases where landlords offer rent reductions or rent-free periods.”
How the rise of online retail has changed shopping behaviour
Online retail has grown at record rates over the last year. Non-essential retail stores have had to close for weeks at a time. When they were able to open, as with essential retailers, they did so amid social distancing restrictions. Many shoppers – especially those who were vulnerable – have turned online in order to feel safer. British Retail Consortium figures suggest that a record 60.6% of UK retail sales took place online in February – the most recent month for which figures are available – as ecommerce grew by 82.2% year-on-year. At the same time, Barclaycard figures showed spending on online groceries growing by 115.2% in February alone, compared to the same time last year.
IMRG figures for the same month show retail growing by 69.5% in February, compared to the same time last year, with m-commerce sales up by 170%. Electricals (+158.5%) showed the fastest year-on-year growth, while clothing (+21.3%) and footwear (+8%) were well ahead of last year despite suffering during 2020. While ecommerce grew at its fastest – of 36% – for 13 years in 2020, according to IMRG, IMRG data for the whole of 2020 shows electricals online sales growing strongly (+90.8%) along with sales of garden products (+222.5%), but clothing (+1.3%) and footwear (-10.8%) performed less strongly in a year that largely kept shoppers at home.
Barclaycard data, drawn from customer use of its debit and credit cards, suggests that the use of Apple Pay has grown fast – with online debits for leisure and entertainment purchases using the payment method up by 70% in 2020 compared to 2019. Three in ten shoppers (30%) and more the half (55%) of those aged between 25 and 34 say they now regularly leave their wallet or purchase at home because they only need their mobile phone to pay. Its customer survey suggests that shoppers have taken in an average of two extra deliveries a month (to seven now) since the pandemic started, and 30% say they have used click and collect services more often. New trends have emerged as well, with 10% of shoppers buying meal kits to make at home over the last year, shopping locally with independent retailers, and 9% using concierge services that bring clothing to their homes and wait while they try it on for an immediate return – although 38% said they’d prefer to have their deliveries and returns via the mail. Some 92% now say they’ll be more mindful about spending in the future, 71% will think more carefully about spending, and 46% will opt for ethical options.
Kirsty Morris, managing director at Barclaycard Payments, says: “A year of on-and-off lockdown restrictions have accelerated many retail trends and created some new, unexpected ones. We can’t wait for the pandemic to be over, but in many ways it’ll be here forever through the consumer habits it has helped shape.
“Retailers need to respond to these trends. Now more than ever, Brits expect shopping to be convenient, quick and good value-for-money. For merchants this means investing in ecommerce offerings and payments infrastructures to accommodate more customer-focused shopping experiences.”
Ecommerce platform EKM says that despite the record number of businesses that have ceased trading, there has been a wave of new retail start-ups, primarily online. Its analysis of ONS figures finds 62,245 retail start-ups in 2020, up from 43,775 a year earlier.
That, says its chief executive Anthony Chesworth, may hold the seeds of future store openings. “While the pandemic has accelerated a shift in consumption patterns towards online retail, many retailers still want to maintain a high street presence,” he says. “There has been an increased awareness of the need to support local businesses, and a physical shopfront lets customers know you are part of the community.”
But as yet, it remains unclear how many retailers will focus on online alone, and how many may return to open stores in the future.
Chris Horner, Business Rescue Expert’s insolvency director, says: “We won’t know for some time how many new habits and shopping methods we adopted in 2020 will stick in 2021 and become permanent or how many will revert to the previous physical model.
“Some companies might bet big one way or another and hope to reap the benefits of being a successful early mover. Others might hedge their bets and hold back investing, redeployment and retraining which could prove more sensible in the medium and long term but would impact negatively in the immediate future in terms of investment and activity.”
Return to high street shopping
Despite the shift online, there still seems to be an appetite to buy in-store. The latest footfall figures from Springboard show footfall rising by 0.5% last week, as the number of people visiting high streets grew by 4% – counterweighted, however, by falls in visits to retail parks (-4.4%) and shopping centres (-2.3%). A year earlier footfall had fallen by 21.7% as the government advised people to work from home and not travel. Nonetheless, visitor numbers to shops last week are still 40.8% down on the same week in 2020, and 56.5% down on the same week in 2019.
Diane Wehrle, insights director at Springboard, says: “Footfall across UK retail destinations continued to strengthen last week, with a modest rise from the week before. At the same time, the annual decline improved significantly but this is a distortion created by a huge drop in footfall in the same week last year as we approached the start of the first lockdown on Monday March 23 2020.”
Retailers are already planning for non-essential shops to reopen from April 12, according to analysis from jobs board CV-Library, which says that the number of job postings on the site has now increased for five weeks in a row, since the start of February. Job postings for the week starting March 15 are 51.2% up on a year ago, and 29.8% up on the previous week.
Lee Biggins, founder and chief executive of CV-Library, says: “For many, this latest lockdown has been the hardest yet and a desire to return to the high street is stronger than ever. Non-essential retailers are clearly hopeful that they’ll be able to open their doors on the April 12 and are recruiting staff to make this transition happen as smoothly and successfully as possible. Providing a third wave of the virus is kept at bay, we predict these significant increases will continue well into summer, until retailers can gauge consumer spending patterns after a year living with a global pandemic.”
He adds: “Only time will tell if the UK government will be able to stick to the dates laid out in its roadmap. When shops do eventually re-open the tills will undoubtedly be ringing, heralding another milestone on the road out of lockdown and a much-needed boost to the UK economy.”