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Stepping out of lockdown: how do retail businesses trade now?

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Non-essential retailers – and their staff – face a very different environment from the one they left behind on March 23 when they closed their shops.

After nearly three months in which 1.6m retail workers have been furloughed, and 127,000 self-employed workers in this industry have been supported by HMRC, the task now is to start to move away from the lockdown and back into work. Confidence will be factor for retailers, their staff, and their customers. How can retailers achieve this, and what tools might help them to do so?

The in-store challenge

During the Covid-19 lockdown, many shoppers have got used to buying online to a greater extent than previously. The RetailX Coronavirus Consumer Confidence Tracker has shown shoppers buying online for the first time, or buying more often over the internet than they previously did.  

This week a study from Swiss technology company Meepl, which has a 3D body platform, suggests that 20% of shoppers say they won’t go back to clothes shops to buy in the way they once did, preferring to shop online instead, and 67% won’t go back to stores until they have transformed the way they use those spaces. 

Another study, the Toluna and Harris Interactive Covid-19 Barometer, questioned 1,379 UK respondents in its latest fortnightly research, and suggests that people in the UK are now cautious about spending money in the near future. During the pandemic, it found, 40% of those questioned went without something they’d usually buy, while 38% had shopped online for something they’d usually buy at a physical store. Looking ahead only 11% are planning to buy something of significant value in the next two months, and while 19% do plan to spend more generally, 39% say they’ll eat out at restaurants less often and 22% are planning to not attend live sporting events as much. On the upside, 30% said they plan to be more optimistic about the future and 20% plan to be more environmentally conscious. 

Lucia Juliano, head of CPG and retail research at Toluna and Harris Interactive UK, said it’s too soon to say whether shoppers will spend more and if they’ll return to the brands they used to buy from.  She added: “The eternal question of what this pandemic has done to shopper behaviour and which behaviours will remain is the marketeer’s holy grail. As we are all learning how to shop differently and are trying new channels as well as products, some changed behaviours will be here to stay. For a brand to build its success during this time, it will need to deliver on its brand promises and customer expectations.”

That said, a study from savings service, which questioned 2,000 UK savers, found they had saved an average £700 a month since the government lockdown came into force, amounting to more than £1.8bn. Going forward, some respondents said they would spend less on takeaways (31%), less on alcohol (21%) and more time shopping online (34%) while spending more on groceries (36%).

Queues at retailers that have already reopened, such as Ikea and B&Q, suggest an appetite to return to shops, while recent Springboard footfall figures have pointed to a pent-up appetite to buy in shops.

Mark O’Hanlon, managing director at Kurt Salmon, part of Accenture Strategy, says technology may help retailers instil confidence. “Prior to the pandemic, retailers had focussed on consumer experiences and making shopping as convenient and frictionless as possible. Now, with consumer confidence at rock bottom, safety is the number one priority in the short term. This may impact the shopping experience and, in turn, short-term sales, so retailers need to respond to this. This is where new technologies can help, such as virtual queueing or shopper density control systems. Retailers who are agile and able to deliver multichannel experiences that secures the trust of their customers are likely to develop a strong customer base during a time where consumer loyalty, both in-store and online, is essential.”

Move online

A new study from Hitachi Capital Business Finance suggests that 43% of small retail businesses already trade completely or mainly online, and have for some time. But that leaves 46% that are not mainly online or moving towards being online, and 10% that are moving towards trading either completely or mainly online post-coronavirus. 

Gavin Wraith-Carter, managing director at Hitachi Capital Business Finance, said: “In recent years, online and digital capabilities have been seen as desirable goals for many small business owners – for others, a consideration for the future. The shock of the Covid-19 pandemic has changed things overnight. Today, online capabilities are essential, many small businesses need them simply to operate and to stay open for business. Our own research has revealed that offline businesses where more than twice as likely as online businesses to have had to close their doors since the pandemic struck the UK (39% Vs 17%). Furthermore, the online status of a small business in the current climate correlates with growth outlook for the months ahead. For example, 72% of the businesses that predicted significant expansion in the next three months were online businesses. In contrast, 71% of the small businesses that predicted they would struggle to survive were offline businesses.”

Fasthosts also says retailers should now consider selling online if they don’t already. “Boris Johnson has given the green light for non-essential shops to open amid the Covid-19 pandemic,” said a Fasthosts spokesperson. “Though this may sound like good news for retailers, sales will be down on normal trading due to newly implemented safety measures. 

“Businesses that have never before adopted an online presence should now be questioning if they should. Online sales have seen a dramatic increase since the start of Covid-19 and we believe this will continue to grow as consumers now fear shopping in traditional brick-and-mortar stores. It’s this fear that could change consumer behaviour for good, meaning businesses must have an online presence to thrive.”

Short-term financing

Gavin Wraith-Carter of Hitachi Capital Business Finance says he’s expecting to see businesses borrow to invest in online. “At Hitachi Capital Business Finance we are investing heavily in our digital channels to support small businesses at a critical time and we expect to see a lot of small business investment and borrowing being directed in enhancing their online capabilities in the second half of the year,” he said.

Meanwhile, Simon Cureton, chief executive of Funding Options, says many will need to strengthen their finances short-term to get past inevitable teething difficulties. He says that while some retailers will see the return of customers to shops end their cash flow problems, many may not. “The unique trading environment with social distancing restrictions in place, coupled with an economy balancing on the precipice of the most significant recession in recent history, will mean consumer spending will be way down in the traditional bricks and mortar retail environment,” he says. “Smart retailers will revise their forecasts and leverage favourable loan rates to manage the short term cash chasm that will need to be bridged until the ‘new normal’ looks more ‘normal’.

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