We’re reporting on the effect of the Covid-19 coronavirus on the way UK shoppers buy – and on how retailers are responding to that changing behaviour. This update comes as 3,983 positive cases have been confirmed by Public Health England as of 9am on March 20 and 177 people have died. The World Health Organisation last week classified coronavirus as a pandemic. This rolling news story covers suggestions, from the IMRG and Kooomo, that retail will move further online as the pandemic progresses, and on calls for more support for retail staff from Joules and for logistics workers from the FTA, as Ikea closes its stores, and Hotel Chocolat looks to raise £20m for headroom in the case of store closures and to invest for future growth.
In today’s briefing by the Prime Minister Boris Johnson and the Chancellor Rishi Sunak, it was announced that pubs, cafes, restaurants, theatres, cinemas are to close as a result of the coronavirus pandemic, but shops can still remain open. Those serving food can, however, start to offer food for takeaway instead.
Many shops have decided to close, nonetheless. Ikea said yesterday that its shops would close till further notice, while Arcadia Group said today that its all of its stores would also shut their doors for the moment. Both suggest shoppers turn online instead: TopShop, for example, is currently offering 30% off all online orders and free standard home delivery.
Today the Government launched a coronavirus job retention scheme
2/ For the first time in our history, the British government is going to step in and help pay people’s wages.— Rishi Sunak (@RishiSunak) March 20, 2020
Government grants will cover 80% of the salary of retained workers, up to a total of £2,500 a month, that’s above UK median earnings level.
The coronavirus business interruption scheme will now be interest-free for 12 months.
4/ Many businesses are hurting now and I can announce that the Coronavirus Business Interruption Loan Scheme will not be interest-free, as previously planned, for 6 months – it will be for twelve months.— Rishi Sunak (@RishiSunak) March 20, 2020
Those loans will now be available on Monday. https://t.co/9blM7svmXw
Additionally, business VAT payments will be deferred, self-employed people can access, in full, universal credit at a rate equivalent to Statutory Sick Pay for employees (£94.25 a week), with their tax payments also deferred, and people on universal credit and working tax credits will see their basic allowance increase by £1,000 a year over the next year.
6/ We are already seeing some job losses. Today I’m increasing the Universal Credit standard allowance, for the next 12 months, by £1,000 a year. I’m increasing the Working Tax Credit basic element by the same amount.— Rishi Sunak (@RishiSunak) March 20, 2020
These measures will benefit just over 4 million households.
8/ Taken together, I’m announcing over £6bn of extra support through the welfare system.— Rishi Sunak (@RishiSunak) March 20, 2020
And to further support the self-employed through the tax system, I’m announcing today that the next self-assessment payments will be deferred until Jan 2021.
Jack Wills has announced the immediate closure of five stores.
The British brand, which was rescued out of administration by Frasers Group in August 2019, will close stores in Dublin, Exeter, Cambridge, Bath and Manchester Trafford Centre.
A spokesperson said: “The group has been working closely with landlords since acquiring Jack Wills to keep as many stores open as possible. Now faced by unprecedented uncertainty in the retail environment, further closures are inevitable.”
UK retailers have cut prices as never before since the Covid-19 coronavirus broke, according to data from LovetheSales.com.
In the last week, on top of what was on sale the previous week, a further 23% of clothing stock was reduced in price. That means 43% more products are discounted than in March 2019. That suggests, says LovetheSales, that retailers are now hoping to mitigate the effect of plummeting high street footfall on their cashflow through online sales.
The most discounted products are in categories including men’s underwear, which has 83% more products on discount, men’s polo shirts (34%), jeans (33%), and t-shirts (33%). In women’s clothing, the most discounted products include onesies (55%), underwear and lingerie (54%), maternity wear (51%) and jeans (32%).
Luxury brands have 123% more products on discount than last week, premium brands 1% more, and high street brands 11% more.
Stuart McClure, founder of LovetheSales.com, said: “Retailers are facing an unprecedented situation right now. One that could put them out of business. They’re seeing immediate drops in footfall in stores, meaning they’re seeing an accompanying sales shortfall. This will lead to an increase in excess inventory. Combine this with late deliveries of products intended to be sold this season, and they’re facing major inventory surplus issues later in the year. These unseasonably high volumes of discount are intended to drive spend and clear stock. However, retailers need to start considering new ways to solve what will become an even bigger issue for them throughout 2020 and into 2021.”
Borough Market in London is extending its online delivery service to all customers within the M25 amid the Covid-19 outbreak. The market is still open for shoppers, and says it’s following new public health and hygiene measures set out in government guidelines.
Borough Market Online has offered deliveries by zero-emission electric bike within a 2.5 mile radius of its London Bridge site since November 2019. Now deliveries will be temporarily extended to any location inside the M25. Click and collect is also available from the market up until 9pm each day.
The market says electric bike couriers will still be used for deliveries within a reasonable distance of the market, but vans – hybrid where possible - will be used further afield. Strict hygiene practices mean that the food is securely packaged, and the option of a doorstep drop service allows it to be received without contact with couriers.
“In these extraordinary times, the delivery zone has been extended to within the M25,” said Kate Howell, development director at Borough Market. “The priority is for the market to be able to deliver wonderful food from our traders to Londoners who have to stay at home and live outside our normal delivery zone.”
Borough Market’s partnership with the Plan Zheroes charity will continue, with surplus produce collected from the Market and delivered to community organisations that help feed some of the city’s most vulnerable people.
Darren Henaghan, managing director, Borough Market said: ““We aim to remain a haven for food lovers while supporting our small, independent businesses. Borough Market has served this community for a thousand years, through thick and thin. It has survived wars. It has lived through food shortages and curfews. As recently as 2017, our community withstood the trauma of a terrorist attack and the subsequent weeks of closure. It did so by remaining close and supportive, by caring about people – and that’s how we’ll get through this crisis too.”
Shoppers can order from the majority of Borough Market traders. Once the order is placed the Borough Market Online team collects produce from the relevant traders and delivers the goods to a designated hub within the market. From here, customers can either collect their order between 12pm and 9pm or it will be dispatched via state of the art zero-emission electric cargo bike to the customer’s address at a pre-booked time slot. At the time of writing, the service was limited amid high levels of demand.
Marks & Spencer says it is moving staff from its clothing and home departments to food where it can, and will also focus on expanding its online clothing sales during the current pandemic. It is also preparing for the possibility that some shops may have to close temporarily. But it says its model of operating parallel clothing and food businesses and its existing strategy of moving its business further online – including through its Ocado Retail joint venture – should give it more resilience than retailers operating in single sectors.
The retailer, ranked Elite in RXUK Top500 research, says it is seeing "substantial sales declines" in both its clothing and home departments at the moment, and says that revenues are likely to be "severely impacted" over the next nine months to a year. It is working to defer clothing and home supplies where possible. "At this stage," it said, "we are not assuming a return to normal trading in the autumn."
Its food business has remained strong and is expected to remain profitable, but while customers have visited its stores to stock up in recent days, it is not seeing the strong uplift that the supermarkets have. That’s because it has a "heavy bias" towards chilled and fresh food, rather than tinned or frozen. It said: "The significant shift to eating in home should however continue to benefit sales in the months ahead. Although there will undoubtedly be supply interruptions, we do not expect these to be prolonged or financially material."
Marks & Spencer is now postponing capital investment that it is not already committed to, freezing recruitment, reducing marketing spend and is taking "extraordinary measures" to hold over new inventory. It says it currently has £1.34bn of available liquidity. It expects pre-tax profits to be at or below the bottom end of expectations in its current financial year which finishes next week. Profits had been expected to come in at between £440m and £460m. M&S says it is too early to say what will happen in the next financial year, but says "we are planning on the basis of a prolonged downturn in demand for clothing and home."
On its website, the retailer is making its click and collect options more flexible, with an 11pm cut off for orders made for next-day pick-up in store. It says its stores currently remain open, although its in-store cafés are closed. In its stores, the first hour of trading is currently reserved for vulnerable and elderly customers on Mondays and Thursdays and for NHS and emergency service workers on Tuesdays and Fridays, starting next week.
ScS today said visitors to its stores had started to fall as a result of the coronavirus pandemic, and it warned of potential impact on both delivery and demand.
It identified risks that it might need to close its stores, head office or distribution centres, the latter potentially delaying deliveries and sales.
ScS chief executive David Knight said, in today’s half-year results statement: “In the past week we have seen reduced footfall and we are mindful of the developing situation with Covid-19 and the potential impact on deliveries and demand. However, we believe the group is as well positioned as it can be.”
More than a quarter (29%) of ScS’ furniture came from China in 2019 and the retailer is currently seeing longer lead times that it expects to return to normal by the end of the year. Customers, it says, have been notified of any delays and have generally been understanding. As yet, it says, it has seen no delays in its UK manufacturing suppliers.
Hotel Chocolat is to raise £20m through a stockmarket placing to give it more headroom in case its stores are closed in the run-up to the crucial Mother’s Day and Easter periods, and to invest in the business.
The retailer says that while group revenue had been up by 6% in February, year-on-year, March revenues are 5% down as store visitor numbers fall.
"With the increasing possibility that the UK Government will impose further public health measures, the group anticipates the ongoing effect of Covid-19 and the continued reduction in high-street footfall is likely to result in some or all of the company’s stores being closed for a period, which will impact company sales and profits. Mother’s Day and Easter, two important trading periods for the company, typically contribute c.12% of the Group’s annual revenue," Hotel Chocolat said in today’s update.
Measures available to it include shifting inventory towards selling online and via digital wholesale.
The retailer is placing the new shares today at 225p to raise the money, which will give it headroom and also enable it to improve its warehouse and distribution capacity as it expands over the next five years, to expand chocolate making capacity by 35% through a fourth production line, and to invest across UK sales channels and open more stores in Japan.
On the Hotel Chocolat website, the retailer has currently suspended next and nominated-day deliveries in the face of strong demand in the run up to Mother’s Day, but says most of its stores are open, although opening times may vary from the normal. It has also suspended chocolate experiences and lock-ins, and is no longer accepting reusable cups.
Wickes’ planned demerger from the Travis Perkins group has been put off as the company focuses on current challenges. Travis Perkins says it still plans to go ahead with the action, and is in an "advanced state of preparedness" for it that means it will be able to move quickly when appropriate.
In the meantime, it says the business had got off to a strong start, with group sales up by 2.4% in the year-to-date. As yet trading has not been significantly affected by Covid-19. "However, due to the rapidly evolving situation and the dynamic UK government response to the impact of Covid-19, the group expects the trading environment to change quickly and materially in the coming weeks. In response to this, the board is taking prudent decisions in order to successfully navigate this period of turmoil."
The retailer says it is withdrawing all market guidance for the time being and has suspended its final dividend.
Nick Roberts, Travis Perkins chief executive, said: "We are absolutely committed to fulfilling the essential role we play in the UK construction industry supply chain in keeping the UK dry, warm, maintained and operational; providing materials, working capital funding and support for our trade customers, large and small.
"Whilst there is unprecedented uncertainty on how the virus outbreak will directly impact our markets and our businesses, we enter this period from a position of strength and security, with a strong balance sheet and access to significant committed liquidity."
Frasers Group, owners of multichannel retail brands including House of Fraser, Sports Direct, Jack Wills, Game and more, today (Friday) says it expects significant disruption to its business from factors including falling store visitor numbers as a result of the pandemic. It now expects that it will not achieve the growth in profits of between 5% and 15% that it had previously expected – and it is giving no formal guidance for its current financial year.
The retailer said its performance had been in line with expectations so far this year, and that its management team was able to respond and adapt quickly. "Over the longer term," it said in today’s stockmarket statement, "the board remains confident in focusing on the company’s elevation strategy."
Ikea today said it would temporarily close its stores to customers at 6pm on Friday March 20. Shoppers will be able to buy online for home delivery instead, with the option of contact-free deliveries.
Peter Jelkeby, country retail manager and chief sustainability officer, said: “These are extraordinary times, and our absolute priority is to ensure the health and safety of our customers and co-workers. We have listened carefully to them, to the advice of the UK and Ireland governments, and have been closely monitoring the situation as this evolves. This is the right decision for us to take at this point. We look forward to welcoming our customers back to our stores in the future.”
Ikea had previously put measures including the closure of its restaurants, cafes and bistros, enhanced cleaning routines and closure of its outside playground facilities in place.
Fashion-to-homewares retail brand Joules today said that it had seen both store visitors and overall revenues fall since Covid-19 first appeared in the UK. Online sales have also been hit, although to a lesser extent, as shoppers spend more cautiously.
It says that it is unable to offer financial guidance on its full-year figures at this point, although it is going to cancel its proposed interim dividend.
Currently, says Joules, it has £16m cash headroom and strong relationship with its bank and with its major shareholder, Tom Joules. But it is calling for more urgent action to support retail workers.
Joules chief executive Nick Jones said: "The challenges that all retailers are currently facing are unprecedented in modern times. Our immediate and over-riding objective is to ensure the wellbeing and protection of our colleagues and our customers. Our teams continue to demonstrate a flexible, can-do attitude during this testing time, and I would like to thank my colleagues across the world for their continued commitment and positivity.
"While the group’s near-term profitability will be impacted by the sector-wide effects of Covid-19, the board is remaining focused on protecting long-term value for its stakeholders and managing the near-term pressures on the business.
"We have an outstanding, unique brand and a fantastic team. I am very confident that Joules will successfully emerge from this very difficult period in a position to continue to deliver its exciting long-term growth plans."
Joules is a Top250 retailer in RXUK Top500 research.
Shopping may move further online – and quickly – as a result of the coronavirus pandemic, the IMRG has warned.
The etail trade association warns that people may have little choice but to move all of their shopping online, both for groceries and non-food products, as the virus continues to spread.
The update came as IMRG said that online sales were slow in February, the month before the pandemic started. Andy Mulcahy, strategy and insight director at IMRG, said: "Now that stockpiling has driven demand to unprecedented levels, we may see a situation where shopper behaviour shifts over to that as a preferred channel very rapidly. Equally for general merchandise – with so little clarity over how long the current crisis will go on, people might have little choice but to switch all purchasing online.”
UK retailers should learn from the Italian experience and prepare themselves for a fast rise in online sales as coronavirus measures tighten, says cloud platform provider Kooomo. It says that now Italian residents are quarantined at home, with most institutions and shops, except supermarkets and pharmacies, now closed, online sales are skyrocketing.
It says that in Italy, online sales of consumer products increased by 81%, compared to the previous week between February 24 and March 1. Orders on placed on Supermercato.24, a site that employs independent shoppers to physically shop at a store on behalf of the customer, increased by 164%. And it expects the trend to continue as shoppers buy online while avoiding public places.
It suggests that retailers such as Amazon could become the biggest beneficiaries. UK supermarkets have also been asked increase home delivery services and expand capacity by up to 20%.
Ciaran Bollard, chief executive of Kooomo said: “The impact of coronavirus on the global economy is accelerating the need to start delivering products to customers who cannot leave their homes. Retailers that have invested in omnichannel solutions and have in-store stock available online will help to ease the negative effect of no footfall on the high street. I know some retailers considering resupplying the main delivery warehouse with shop stock to help fulfil this demand.
“Although this will put pressure on retailers, there are great opportunities for those that rise to the challenge and hopefully the UK and Irish markets can learn from the situation unfolding across Italy. Where the supply chain is affected for home deliveries, customers are willing to have a longer delivery window to avoid going to stores. Therefore, we would advise retailers to make sure communications with customers are accurate and transparent, as it is crucial to ensure delivery timings on an online store are updated to avoid disappointment.”
The Co-op is hiring 5,000 store workers on a temporary basis as it looks to staff up during the current crisis. The convenience store operator says it will take on people through a fast-track process and wants to hear from those who have lost jobs elsewhere and need temporary work, or those who want permanent jobs.
The retailer says the boost in numbers across its 2,600 stores will help them to get stock on the shelves, to fulfil online orders and help vunerable customers. People interested in applying can drop into their local Co-op store.
Jo Whitfield, chief executive, Co-op Food, said: “The Co-op has a critical role to play in supporting our members, customers and colleagues, as well as the local communities that our stores sit at the heart of. Whilst our store and depot colleagues are working around the clock to ensure people have the essentials they need, we are all too aware that many people working in bars, pubs and restaurants are currently out of work. It makes perfect sense for us to try and temporarily absorb part of this highly skilled and talented workforce who are so adept at delivering great customer service, as we work together to feed the nation.
“We’re talking to a large number of organisations whose workforces have been affected by this situation. To anyone in this position who is looking for a job in one of our stores, our message is simple: please get in touch now. We’ve made the application process quicker than ever and hope to have new colleagues on the ground within a day or two. What we need now is genuine, tangible cooperation as we look to support the wider economy and help the nation overcome this challenging period.”
The retailer joins a number of other grocers who are currently recruiting. Morrisons is hiring 3,500 new delivery staff while Asda is also reported to have said it is looking for staff who can start as soon as next day.
The supply chain is strong enough to stand up to the Covid-19 crisis, says logistics industry body the FTA – but it needs support from partners in order to carry on working.
Elizabeth de Jong, policy director at the FTA, says: “Logistics is responsible for every item used in this country, from the food we eat to the manufacturing components industry relies upon and, as such, should be recognised as a critical emergency service and its workers given the same recognition as those working for the emergency services or in healthcare. It is vital that they have urgent access to healthcare, washing and toilet facilities and their children are able to attend school, so that the flow of goods can continue unchecked.”
De Jong added that logistics also needs government support for contingency plans to address driver shortages caused by sickness, as well as a lack of compliance testing resource to ensure that operators can continue to operate legally and effectively.
She said: “There are still areas of ongoing regulation of our industry which require clarification, to ensure that businesses can continue to function efficiently and keep supplies moving. It is clear that we are facing unprecedented times, and additional financial support may be required for many businesses, particularly those that supply the tourism or hospitality sectors, in the very near future if the logistics sector is to survive.”
It’s also important, she says, to keep logistics moving as normally as possible. “Logistics can cope with the challenges of the pandemic, providing everyone maintains a balanced and sensible response to the situation,” she said. “Our members are well prepared to keep goods and materials flowing to all areas of the UK’s economy, providing a pragmatic approach is maintained.”
The news that delivery drivers have been classed as key workers has been welcomed.
The status means that drivers’ children will continue to be able to go to school if their parents need to work during the coronavirus outbreak.
This, says David Jinks, head of consumer research at ParcelHero, is to be welcomed.
“The coronavirus outbreak has created a massive growth in home deliveries which has resulted in some home delivery services being stretched to near breaking point and the complete suspension of Ocado new orders until Saturday; and it was essential to avoid more delivery drivers missing work, because they had to look after young children.
‘This decision will help keep home deliveries on the road, and give a platform for retailers and their courier partners, to build up their delivery capabilities further in the days ahead.”