We’re reporting on the effect of the Covid-19 coronavirus pandemic on the way UK shoppers buy – and on how retailers are responding to that changing behaviour.
This update comes as, as of 9am on April 30, 171,253 people have tested positive for coronavirus and 26,771 people have died following a positive Covid-19 test result. Over the previous day, 6,032 people tested positive and 674 people died.
Global retail sales set to fall by 9.6% in 2020: Forrester
Analysts have predicted that retail sales will fall by 9.6% around the world in 2020 – equivalent to a loss of $2.1 trillion (£1.65 trillion).
Forrester expects that non-grocery offline sales will see growth contract by 20% during the year, with many bricks and mortar retailers expecting to make a loss in 2020. Many assume their online sales growth will not be enough to make up for sales lost as a result of store closures.
Across five European markets – the UK, France, Germany, Spain and Italy – retail sales are expected to decline by 10.4%, or €260bn. In the UK alone, the loss could come to £56bn, as sales fall by 11.4% from 2019. Sales in France (-9.5%) and Germany (-10%) are expected to fall slightly more slowly. And in the US, retail sales are expected to fall by 9.1%, or $321bn, compared to 2019.
“Covid-19 is significantly impacting the global retail landscape,” said Michael O’Grady, principal forecast analyst at Forrester. “Retail categories like grocery and essential consumables are performing well, while other categories like fashion, beauty, and cosmetics are seeing a marked decline in consumer spend. In 2020, there will be a significant decline in global retail sales, particularly with non-essential items sold offline, which will be a big challenge for brick-and-mortar retailers. Online sales, however, will be more resilient. To navigate the crisis, retailers need to manage their costs and drive their ecommerce sales and services as much as possible.”
Intu appoints chief restructuring officer as rent payments fall
Shopping centres business Intu has appointed David Hargrave as as chief restructuring officer. Hargrave, whose experience includes business turnarounds and partnerships in the restructuring practices of PwC and EY, will help lead the business through a difficult time, in which it has seen rent payments fall. As of March 26, 40% of its due quarterly payments have been paid. Intu says, in a market update today, it is now offering monthly rents until the end of the year and is now talking to customers about a further 28% of rents due. “There are a very small number of cases where customers are not currently engaging with us to find a consensual solution – these are large, well-capitalised brands who have the ability to pay but have chosen not to,” said Intu in today’s statement. “In these instances we are prepared to take more robust action to enforce the legally binding terms of those leases.”
Currently about 60% of Intu centre staff are furloughed, along with about 20% of head office staff.
The business says it has now agreed waivers around covenants on its debt obligations and is board is to take a 20% salary reduction for the next three months. It has found ways to save about £3m in costs and is to reduce its service charges for customers.
Central England Co-op offers store staff face visors
The Central England Co-op says it has now provided its staff with face visors, should they choose to use them. It says all of its 6,200 permanent staff and 1,000 temporary employees working in its more than 260 food shops and petrol stations in 16 countries in the West Midlands and East of England now have the option of wearing them, although they do not have to.
Visors sit alongside a range of other measures in stores aimed at keeping customers and colleagues safe including social distancing, gloves and hand sanitiser, over 1,000 checkout screens and over 150 security guards to help with queues.
Debbie Robinson, Central England Co-op chief executive, said: “Nothing is more important to us all at Central England Co-operative than the safety of our colleagues and customers. We’re closely following Government advice in our approach to social distancing and have rolled out a range of new measures for our stores that now includes face visors for colleagues if they want to wear one.
“We continue to ask all of our customers to co-operate with these measures to keep us all safe and allow us to continue to serve our communities.”
Small businesses move online fast
A third (36%) of the UK’s small businesses are focusing online while a similar number (33%) are introducing new products or services as they react to the Covid-19 pandemic, new research suggests. The study, from Small Business Britain and BT Skills For Tomorrow, questioned more than 1,000 UK small businesses in April, and also suggests that 27% of small businesses have won new customers, while 19% have moved to a new delivery model, such as home delivery.
Nonetheless, 56% of businesses expect profits to fall by more than 50%, and 24% expect profits to fall by more than 20%. Just 8% expect profits to rise. More than a fifth (21%) say they are very short of confidence, while 29% are very lacking in confidence and 20% fell neutral. Just over a quarter (28%) feel confident. Almost a third (32%) have furloughed staff.
Cash flow is the top issue for 64%, while 60% say they are concerned about falling demand 17% are worried about supply chains.
Michelle Ovens founder of Small Business Britain, said: “The UK’s small businesses are facing an incredibly tough situation, but we are seeing many come back fighting, adapting and showing just how resilient and entrepreneurial they can be. While there is clearly a marathon ahead, and the outlook remains very worrying, our new data shows glimmers of hope. We are seeing a slight calming down of panic, a reduction in expected impact, and confidence picking up very slowly. This is likely in response to the support shown by the government and other forms of business support. It is vital that more small businesses reach out for the help available, as this will guide them through the challenges ahead.”
The UK has 5.8m small businesses.
Small business confidence dips
Quarterly tracking from Hitachi Capital Business Finance suggests a fast fall in small business confidence. While 39% of those questioned predicted business growth in the first three months of 2020, that has now fallen to 14% for the second quarter of 2020. Just under a third (31%) are scaling back their businesses, while 30% say they will struggle to survive until the end of June.
So far, 32% of businesses questioned have temporarily closed, 1% have closed permanently, 34% have adjusted to home working, 12% have moved to become online businesses and 4% have diversified in order to stay afloat. Only 13% say nothing has changed. Offline businesses (37%) were more than twice as likely as online businesses (16%) to have temporarily closed, while online businesses (28%) were more than twice as likely as offline businesses (13%) to have seen no change to their business.
Gavin Wraith-Carter, managing director at Hitachi Capital Business Finance, said: “Small business outlook in recent years has at times defied gravity. Through the uncertain periods of the Brexit era, the Scottish Referendum and various UK General Elections, our study has shown small business outlook to be stoic and positive. The current climate though has brought a sudden and seismic shift in confidence and outlook. Many small businesses have been unable to trade and many are having to revise growth forecasts as the whole supply chain has been shaken by the current period of lockdown.
“Whilst we expected to see a big fall in confidence for this quarter, the true test will be if and how it recovers during the summer months. The fact that only 1% of small businesses have permanently closed their doors suggests the majority will bounce back. It is going to be a different world though and at Hitachi Capital Business Finance we are working hard to help established small businesses to plan for change. We predict the digital economy will be bigger for the small business sector and business owners will have to diversify and adapt. As the country looks to get back on its feet the small business sector will be more important than ever to power economic growth for the country at large.”
Image courtesy of Central England Co-op