The 2021 RetailX Top500 report arrives twelve months into a period of rapid and drastic change for UK retail. The coronavirus pandemic locked down the UK’s population for much of 2020, pushing them towards buying online, accelerating a switch to digital and hastening the demise of those brick and mortar retail stores that had previously been struggling to adapt to modern consumer habits.
As rolling lockdowns inevitably continue into 2021, new shopping behaviours will also continue to develop. Factor in Brexit’s as-yet unknowable impacts and 2021 promises to be a year of continual change – a state which potentially favours the most disruptive and innovative of retailers.
What happened online in 2020?
During the year, online retail saw its sharpest year-on-year growth ever. Figures from IMRG suggest that it grew by 36.7% compared to 2019, while more recent ONS figures point to an even bigger 46% boost.
Across retail as a whole, though, overall sales fell by 1.9%, with clothing one of the hardest-hit sectors. Non-store retailers (+32%) and food (+4.3%) retailers showed record overall sales growth of 32% and 4.3% respectively. Yet fuel sales fell by a record 22.2%, while department stores (-5.2%) and other stores (-11.6%) saw declines.
Home and garden retailers saw a brief uptick as locked-down shoppers past the time improving their immediate surroundings, while home working and home schooling fuelled sales of iPads and laptops. According to the IMRG research, online electrical sales rose by 91% after a 14% drop in 2019, while home and garden sales rose by 74%. By contrast, clothing only managed a 1% rise, largely led by online sales of ‘at home’ wear.
Online, multichannel retailers led ecommerce growth as physical stores closed and shoppers were encouraged to stay in. ONS figures show online household goods growing by 73.9%, while online department store sales were 65.9% ahead. ‘Other’ stores, from electricals retailers to jewellers, bookshops and toy shops, saw their online sales grow by 73.4%.
This has propelled B&Q, for instance, into the Leading tranche of the UK Top500 list, even though it could only open up several weeks into the first national lockdown. B&Q owner, the Kingfisher Group, saw ecommerce sales across the group grow by 153% in the three months to 31 October – compared to the same time in 2019 – to account for 17% of group sales in the three months to 31 October. Its click and collect alone grew by 216% to account for 77% of online sales.
ONS figures show that pureplays and other non-store retailers saw sales grow by 32% – the largest annual increase the category has ever seen.
2020 also saw the expansion of peak trading, with Black Friday becoming a much longer ‘Black November event and some retailers reporting 70 to 80% increases in online traffic.
What happened on the high street?
For retailers that lacked balanced multichannel strategies, 2020 was a shock. Big names including Arcadia, Debenhams, Oasis and Warehouse, Laura Ashley, Bensons for Beds and Edinburgh Woollen Mill lead the list of over 40 high street retailers identified by RetailX as going out of business, with the loss of around 175,000 jobs, according to the Centre for Retail Research. To put that into context, only about five Top500 retailers go into administration during a typical year but in 2020, groups accounting for multiple brands failed.
Retailers that invested strongly in technology to balance online and store channels effectively had a distinct advantage during 2020. At Next, for example, 36% growth in online sales in the fourth quarter of 2020 helped it to offset a dramatic 43% loss in store sales.
The year’s biggest winners, however, have been marketplaces and grocery retailers. Amazon has maintained its position in the Elite range of the Top500 in the UK, where it now sits alongside grocery retailers Asda and Tesco, which have benefited from the shift online. General merchandiser-cum-marketplace Argos benefited from its presence within branches of Sainsbury’s during the past year and also returns to the Elite.
Amazon, Argos and, to some extent, Asda, have all done well from offering a broad range of merchandise across proven online and mobile properties. Asda also had the advantage of being classed as essential food stores, so kept its doors open throughout while still being able to offer a broad range of non- food, non essential items on its shelves.
What will happen in 2021?
Since lockdowns are going to remain a feature of 2021, those retailers with good online and omnichannel offerings are likely to thrive. Pureplays, too, are set to continue their disruptive streak, with many filling the gaps left by the closures of big name stores. Most recently, Boohoo has bought the Debenhams website in order to turn it into a marketplace, while in the highly pressurised apparel market, businesses such as very.co.uk, missguided and even Asos are going to soak up the demand left by the collapse of Arcadia. Indeed, it’s already been reported that Asos has been looking at buying some Arcadia brands.
Successful players will invest more in technology to improve all aspects of their online services, while many will try to capitalise on their online gains by creating or improving loyalty programmes in order to keep fickle users entertained and engaged. This approach has worked for H&M which, according to Emarsys, drove its loyalty scheme membership to more than 100m people during 2020. Over the coming year, such schemes could also act as a way of ‘inviting’ shoppers to high street stores in controlled numbers once doors are tentatively reopened.
Mobile has had its own bumper year, boosted by the shift to digital. According to research by App Annie, consumers in 2020 collectively spent 82bn hours in shopping apps – that’s a huge 30% up from 2019. Breakout UK retail apps during 2020 included Amazon, with a 55% year-on-year growth; Tesco groceries with 150% growth and SHEIN with a 490% growth.
With Brexit now a hard reality, overseas sales already seem to be a less certain trend for 2021. However growth for UK retail is inextricably linked to exports. Research by cross-border platform Global-e saw a 57% rise in outbound ecommerce sales from the UK in 2020, with the peak holiday trading period in November experiencing a 42% YoY like-for-like surge in international cross-border online sales compared to the same time in 2019.
Much of this demand has come from outside Europe – particularly China – before peak, in a roughly 60:40 split. In December 2019, retail ecommerce sales in China were predicted to be worth $2.328tn for 2020, yet the actual total could have been even higher due to Covid-19. UK retailers looking to increase their sales might want to consider exploring this avenue, given the high demand for British goods in China.
Separate research by eShopWorld finds that the fastest growing markets for its technology and services were the Philippines (+258%), Morocco (+215%), Chile (+211%), Puerto Rico (+203%) and Egypt (+196%). The top reasons cited for purchasing internationally were lower costs, including duties, taxes and shipping (36%) and the availability of those products that couldn’t be found in the shopper’s own region (35%).
The UK’s retail landscape was altered dramatically by the events of 2020 and will continue to be changed by a combination of Brexit and Covid-19. With it, the UK Top500 list has also changed. With more retailers having to embrace online and digital at an ever-faster pace, there will be a continued shift towards online-led omnichannel services, an increased reliance on loyalty and more use of mobile.
There will also be a raft of new entrants. The rise of marketplaces and the moves made by social media and video platforms such as Instagram, Facebook and YouTube to facilitate sales from their feeds could well have a profound impact on the Top500 in 2021.