This week’s budget didn’t deliver the online sales tax that some had feared may be introduced to claw back some revenue for the exchequer, but was it really the retail-booster that the sector had hoped for?
On the surface, it looks like Rishi Sunak has handed the retail sector a multi-billion-pound lifeline to help it survive the rest of the lockdown and then rebuild in the summer. However, looks closer and it seems the money is too little, mis-directed and, off the back of a hike in corporation tax in 2023, not so much robbing Peter to pay Paul, but robbing Peter tomorrow to pay Peter today.
The problem lies in the budget targeting retail as it was, not how it now is. While there is an undeniable need to support shuttered shops to save jobs and to make sure that there is a physical retail world to return to when we are released, that retail landscape is changed.
At best we are now looking at a hybrid retail model, more likely at one that is skewed to digital, with the physical world playing a part in that – not the other way round as it used to be before the pandemic.
The budget seeks to support the physical retail world and is light on investment in digital and omni-channel. If you look at the funds available, they are very much aimed at mid and top-tier physical retailers and the hospitality sector. And the top-tier of all three are likely to end up stung for all the money in 2023 when corporation tax rises two pence in the pound to 25% in 2023.
One school of thought is that the money would have been better spent investing in digital and omni-channel – and skilling people to work in this technologically enhanced world, rather than protecting ‘old’ jobs. The reasoning is that the grants and schemes in place as of today’s budget will protect current jobs in the short term, it does nothing to prepare the industry for what is coming down the pipe.
As the industry has to become more of a digital-physical hybrid, so the skills needed will be different – and many of the people supported today will lose their jobs anyway without the right skills.
It might seem like doom-mongering, but there is a valid point to this idea. No, there won’t be the mass job losses in one fell swoop – well aside from the 200,000 retail workers that have been shed already – but we will see many jobs go slowly as the ‘old retail’ model continues to struggle. Unless there is an investment in technology and training people to work in this new world.
A canter through the rest of today’s news shows that things are already changed. For instance, half of shoppers think that QR codes are the future of retail in the contactless age (to be fair, Rishi did up the contactless payment limit), seeing them as the ideal way to bridge the gap between digital and physical retail.
Hotel Chocolat sees 51% of its sales now coming from online, while the number of online orders collected from Wickes’ stores grew by more than 450% during its last financial year, while home deliveries more than doubled. Farfetch saw its online sales rocket 64% last year, Lovehoney has had to replatform to meet skyrocketing demand and Ralph Lauren has opened an online luxury apparel rental service – all to cater to the new way people shop.
These are just a few examples of how things have changed. Of course, when stores re-open there will be a return to shopping in them – physical retail is far from dead – but it is changed. It will now be interesting to see how the budget, designed to help the retail world as it was, will play out as things get back to, dare I say it, the new normal.