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 May 11, 223,060 people have tested positive for coronavirus and 32,065 people have died following a positive Covid-19 test result. Over the previous day, 3,877 people were reported to have tested positive and 210 people were reported to have died following a positive test.
The Government’s coronavirus furlough scheme has been extended to October, Chancellor Rishi Sunak said today. Support will continue at 80% of salaries, but employers will be able to start to take their staff back part time over the summer. More details here.
Moss Bros’s online business is to start up again tomorrow, with a reduced workforce. The formalwear specialist is also developing plans to reopen its stores from June 1 – or as government permits them to do so under its phased reopening plan.
The retailer, ranked Top100 in RXUK Top500 research, closed its shops and online operations when non-essential retail stores closed on March 23. Moss Bros has been one of a relatively small number of retailers whose websites have remained closed throughout the lockdown. IMRG research last week showed Moss Bros was among six out of 300 websites it was tracking that were still closed. In a March 23 trading update the retailer said that it was debt free and had cash in the bank, and that it was managing the business in order to reduce costs and conserve cash.
Since then, it has furloughed staff via the government’s Coronavirus Job Retention Scheme, reduced board salaries by between 60% and 70%, made redundancies where unavoidable, paused all non-essential capital expenditure, and has talked to landlords and suppliers about discounts and extended payment terms. It says it still has enough resources to trade into the second half of 2021 and remains both debt free and with cash in the bank.
The retailer said it was still in dialogue with the Takeover Panel about a previously-agreed £22m offer from the owner of Crew Clothing that would have taken it private. Brigadier Acquisition Company is looking for a ruling from the panel that would allow it to lapse its offer.
AO says that shopping online has become “an unavoidable way of life during lockdown” and that it was proud of AO’s part in that. During lockdown, it says, 100% of the electricals market moved online, and it says it now expects online electricals sales to keep a higher share of the market than before coronavirus. Although overall sales in the category have fallen, AO says it has seen demand and its market share increase across all categories since the lockdown.
AO says it’s put social distancing and enhanced safety measures in place to protect its staff as they work in its warehouse or make deliveries. Those staff who can work from home are doing so.
The trading update came as the retailer said it had refinanced £80m in lending and that its sales and profits, excluding its now closed Dutch operations, are within the range of current analyst expectations.
AO founder and chief executive John Roberts said: “For the last 20 years I believe we have been a driving force of change, making things better, easier and cheaper than ever before for customers with outstanding levels of service. Never before has that service been more necessary or relevant and so I am very proud of the record customer satisfaction scores we are achieving through this period.
“In terms of online shopping behaviour, I believe we have seen five years accelerate into only five weeks and we will plan to cement that change as we impress more new customers than ever with the AO Way.”
Retail property developer and operator Land Securities says it’s been well placed to respond to the challenges of Covid-19, thanks to a strong balance sheet and “resilient operational performance”. The scale of the challenge was underlined, however, by a 20.5% fall in the value of its retail properties. Four of its shopping centres are completely shut, while only essential retailers such as supermarkets and pharmacies remain open at its other sites.
Land Securities chief executive Mark Allen said: ““I join Landsec at an extraordinary time. The effects of Covid-19 are accelerating ongoing structural trends across the real estate sector, while its longer-term societal and economic consequences are yet to be determined.”
He added: “I am confident Landsec is approaching the future from a position of strength. We are prepared to be bold in our thinking as we navigate both the challenges and opportunities arising in the long term from changing market trends and will not lose sight of our wider sustainability objectives. We will continue to lead the sector on major issues such as climate change and remain committed to acting as a force for good in the communities in which we operate.”
The update came as Land Securities reported pre-tax loses of £837m for the year to March 31, as the value of its assets fell by 8.8% or £1.2bn, and said it would not pay a dividend. The value of its retail properties alone was mostly responsible for that fall, as retail saw asset values decline by more than 20%. As of March 31, it said its retail space was 3.9% unoccupied, against an overall like-for-like group void rate of 2.4%. Like-for-like rental income for the year was down by £10m, or 3.9% compared to last year, while footfall for the first 11 months of the year was down by 1.2%, while benchmark footfall was down by 3.7%. Same centre sales, again for the fist 11 months of the year, was up by 0.9%.
But it said that the continued rise of online shopping and changing consumer behaviour had already had pulled down asset prices in a way that it now expected to be more “structural in nature than cyclical”. The coronavirus has also now had a negative value on asset valuations.
During the year the company also committed to becoming a zero carbon business by 2030.
Kingfisher today showed the effect of Covid-19 lockdowns on its businesses. In the UK, B&Q second-quarter sales fell by 22.1% but Screwfix sales fell by only 0.1%. Online sales grew by as much as fourfold from mid-March - but overall sales remained down. Read the full story here.
Data and analytics company Nielsen Global Connect has suggested that the UK’s retail industry will need to reboot itself as it moves on from Covid-19. It expects the industry will see a delayed recovery towards the end of this calendar year and that businesses will need to adapt to new customer behaviour in the meantime.
It groups new customer behaviours into ‘constrained’ and ‘insulated’ spenders: the former will bulk buy and budget their spending, having seen their employment hit severely, while insulated spenders will be cautious but have not yet been affected financially, and will be more likely to spend on indulgence. Customers will rethink the value they put onto products such as healthy and hygiene, and technology that reduces health ris, while favouring locally produced products. Retailers, says Nielsen, will be judged by their decisions.
Paul Walker, Nielsen UK & Ireland managing director said: “It is essential that retailers and businesses across the retail supply chain ensure that they are well prepared to make the sufficient changes in order to live up to the demand from consumers, as well as the changed behaviours from UK shoppers. The ‘reboot’ scenario that Nielsen has identified for the UK means that retailers and brands need to urgently examine their strategies as they plan for their path to regeneration. There is unlikely to be a return to ‘normal’, and success post-pandemic will require understanding of how your brand, marketing strategy and product mix is able to recalibrate to meet the changing needs of these two key consumer groups - the insulated and the constrained.
“Never before have we had so many people out of employment so quickly, with mounting income pressures, the closure of many businesses and an ongoing health crisis in which many lives have been lost and for which there is currently no vaccine. Retailers and brands therefore need to reassess their priorities and consider how they can demonstrate care and empathy as well as providing a service to gain loyalty in the long term.”
Most (79%) retail property owners now believe that Covid-19 will change the way that retail property is leased for ever, as well as the terms on which it is leased, according to retail agency Colliers International.
Data such as footfall, trading turnover and how individual shops helps to generate online sales will all become new metrics for retailers looking to lease stores, says Colliers – and 40% of the landlords it questioned said it would take these into account when setting rents.
Matthew Thompson, head of retail strategy at Colliers International, said: “Owners are under pressure to deliver high quality, high quantity footfall and brand prominence for their occupiers – and crucially, must be able to prove that their strategies are delivering.
“In this context, it’s clear that we’re going to move away from the old model of how shops have been rented out. In an environment that can integrate masses of relevant datasets, more precision can be brought to the pricing process and this will benefit both landlords and retailers.”
However the survey also shows that many landlords are not yet in a position to apply data in to create a new leasing methodology, and that 40% would not be prepared to share those insights into return for sales data if they did have them.
“This unwillingness to share data between stakeholders needs to be resolved if a new model for retail property leasing is to emerge from the devastation of the pandemic,” said Thompson.
Cross-border online sales have risen by an average of 11% worldwide so far this year – to mid-April – compared to the same time last year, says cross-border ecommerce solutions provider Global-e. Within that, says the business, there are significant differences between regions that have not been severely affected and those that have been. Global-e has also seen significant differences in market performance between regions depending on what phase of the pandemic they are going through.
The business has analysed data for more than 350 merchants selling internationally into different markets and says that in Italy, online cross-border discretionary spending has jumped since the beginning of April, as daily infections fell by between 30% and 40%. By April, sales were up by more than 40% on March. Spending has also risen steadily during April in markets including Austria and Denmark. But sales still remain a little lower than usual in Australia and New Zealand, which went into lockdown relatively late and are currently about 25% down in the US.
In its new white paper, Covid-19 cross-border ecommerce trading implications: insights so far and future outlook, Global-e puts forward suggestions for retailers selling to new cross-border markets, including updating messaging, offering special promotions and discounts, and having a multi-carrier approach to international logistics and keeping international shoppers informed.
Amir Schlachet, co-founder and chief executive of Global-e, said: “It is already clear that Covid-19 is having a huge impact on how consumers shop worldwide and many retailers have become completely dependent on their online stores. As the spread of Covid-19 differs between markets, reaching its peak at different periods during the first third of 2020, we have seen that brands and retailers selling across multiple markets were able to balance the sales between markets and in many cases have seen increases in their overall international ecommerce sales throughout the crisis.
"Cross-border ecommerce will play an important part in retailers’ recovery as it enables retailers to serve demand from countries where shoppers have returned to normal after passing the peak of the pandemic. Even with lockdowns lifted and brick and mortar stores reopening, many shoppers are continuing to shop online, suggesting the recovery of high street retail is slower and may never fully recover to pre-crisis levels. This acceleration of the shift towards online retail has underscored the need for brands and retailers to have a D2C global ecommerce strategy in place.”
Non-essential retail shops could open as early as June 1, as long as coronavirus infection rates are under control, the Prime Minister suggested on Sunday. A plan to reopen the UK, published on Monday, included the detail that the plan will come in phases, with different types of non-essential retail shop opening at different points. The BRC’s Helen Dickinson says that safety is what counts when deciding when shops can reopen. Read the full story here.
The government has issued fresh guidelines on how retailers can ensure their shops are Covid-19 secure. The guidance is aimed both at those that are already permitted to operate, such as supermarkets, food shops and chemists, and at those that run shops which are currently closed, such as fashion shops and other non-food stores, so that they can prepare their shops for reopening. Read the full story here.
Customer-facing retail sales staff have died with coronavirus at a higher average rate than the working-age population as a whole, according to new official statistics.
Thirty-three male sales assistants and retail cashiers of working age died between March 9 and April 20 with Covid-19 coronavirus mentioned on their death certificates. That’s a rate of 19.3 deaths per 100,000. Thirty-seven female sales assistants and retail cashiers have died (6.5/100,000) during the same period, according to new findings from the Office for National Statistics (ONS). The figures are part of an ONS analysis of deaths by occupation and gender. Read the full story here.