What retailers can expect from 2021
The latest blog post from Springboard’s Marketing & Insights Director, Diane Wehrle.
The retail trading landscape created by Covid19 – something we have clearly never experienced before – inevitably makes forecasting the future for retail, even in the near future, far more challenging than under normal (even recessionary) trading conditions. However, Springboard’s data and insights provides the evidence needed to identify the key trends that emerged during 2020 as a consequence of Covid, and what this is likely to mean for retail in 2021. Hopefully my blog brings these together effectively so you have the insights required to help your business thrive over this year and beyond. Please do get in touch to discuss any point raised here – I would be delighted to hear from you!
The overriding threat for retailers in 2021
Undoubtedly the overriding threat for retailers in 2021 is long term store closures due to ongoing coronavirus restrictions; some notable retailers have already ceased to trade both in the UK and the US and there will undoubtedly be more of these cases and also the closure of smaller stores that are just not able to withstand long term closure. Indeed, this is already evident in the UK vacancy rate compiled by Springboard in October which rose to 11.3%, the third consecutive rise since January 2020 and the highest rate since 2013.
The two key periods of 2021: Pre Vaccine and Post Vaccine
Given the increasing rate of infections, we have to expect ongoing restrictions until the vaccines are rolled out in a meaningful way. In the light of this, we need to break down 2021 into two key parts: pre vaccine and post vaccine. The Pre Vaccine 2021 period, unfortunately will look much like it does at the moment; we now are all strikingly aware of the impact that social interaction has on the spread of the virus, and so the restrictions on retail and hospitality will be very much present in Q1 of 2021. On the basis that the vaccine is successfully rolled out by Q2, then the outlook for retail may well look a lot brighter with stores able to trade consistently, albeit with social distancing measures still in place.
Shoppers still want to visit stores
But the light at the end of the tunnel is the knowledge that shoppers still want to visit stores, and not simply shop online; Springboard’s footfall data evidences this, with footfall shifting from a decline of -82% in the depths of the first lockdown in the spring of 2020 to -25% by August 2020 when stores and hospitality were open, despite social distancing measures being in place. We also know that despite lockdowns, the vast majority of consumers still visit stores for grocery shopping rather than shopping for food online; even during the first lockdown online grocery shopping represented just 11% of total grocery spend (Source:ONS) – and this has supported retail parks, the majority of which host a large food store.
The resilience of retail parks
It has meant that whilst footfall in high streets and shopping centres has dropped by as much as -54% since the first lockdown, in retail parks the drop has been around a half at -28%. Of course, in addition to having the advantage of food stores, retail parks are almost perfectly set up to deal with Covid; they are easy to access by car (so rely little on public transport), car parking is free, plentiful and outdoors and stores are large which makes social distancing far easier to achieve.
The acceleration towards online
What has been brought about by Covid, and has been well narrated, is an acceleration in the changes that were already occurring in retail towards online – indeed with no other option during lockdowns it’s really not a surprise that consumers shifted at least some of their spending to this channel. It meant that in May 2020 online accounted for 32.9% of total retail spending and 46.8% of fashion spending.
The growth of localism
However, what has also occurred, and which Springboard had the first evidence of, was the growth of localism; as shoppers worked from home and were fearful of crowds, local high streets came into their own and were far more resilient in terms of retaining shoppers than larger town centres – most are easy to reach on foot from home so can be accessed during the working day and are less congested than larger locations. This is highlighted by the fact that footfall in market towns across the UK has declined by an average of -45% since the first lockdown, peaking at -21% in August, versus an average decline of -66% in regional city centres, and a peak of -37% in August.
The shift in consumers’ buying habits
But it’s not just where consumers spend their cash that has changed, it’s also what they have been spending cash on. Alongside the stories of struggling retailers, there are numerous examples of retailers who have had a tremendous trading year – from cycling and leisure good retailers to homewares and garden centres and pet stores. We know that many fashion retailers have struggled, and some key operators have gone by the wayside such as Arcadia and Debenhams, but we also know that the issues these operators were facing were simply another example of the acceleration of existing trends.
However, it is not only the channel used by consumers that has shifted, but for fashion there has been a fundamental change in the ranges that are in demand; as we are forced to stay home for both work and leisure there is inevitably far less of a need for formalwear (either day or evening wear) and a far greater demand for casual, athleisure and lounge wear. After all on a Zoom call or Google Hangout, the only bit that is visible is the top half!
The vulnerability of major cities
The other clear impact of Covid has been the loss of trade to our largest regional cities, previously regarded as the most invincible retail locations in the UK. For all of our major cities, the loss of the working population has had a hugely adverse impact.
However, Central London – which not only relies on its working population but also domestic visitors and overseas tourists and has by far the greatest reliance on public transport for moving consumers around – has been dealt a hammer blow. Footfall in Central London dropped by an average of -72% since the first lockdown, and by as much as -88% before retail reopened in England in June. The appeal of London for overseas tourists is undisputed, however, the removal of tax free shopping for overseas tourists removes a key incentive to visit for those who will come to the UK to shop when international travel restarts during 2021 and beyond.
Looking forward to 2021
Looking forward to 2021, it is clear that online shopping will rebase at a higher level than before Covid, as a proportion of those online shoppers who were previously “store only” shoppers are likely to continue to use this channel for at least some purchases even when stores reopen. Inevitably therefore, footfall will rebase at a lower level than before Covid, and we are likely to see it settling at a level somewhat below that recorded in 2019. The other factor in the mix is of course Brexit and the potential impact that this may have on retail, however, it really is impossible to judge this from where we are at the moment in the midst of a pandemic. Needless to say, Springboard will be closely monitoring the impact of Brexit into 2021 as retail reopens across the UK, and consumer behaviours recover post pandemic.
Despite the challenges faced by bricks and mortar retail, on the plus side the resurgence of our interest in and loyalty to our local high streets should not be under-estimated. For years, we bemoaned the decline of our local high streets, but one of the very few good things to come out of Covid may be that this has been at least slowed or even reversed, with consumers rediscovering local businesses and what they can offer.
From a broader perspective, prospects for stores and destinations generally should not be written off; indeed it should be just the opposite. Much of the narrative pre-Covid focused on the growth of experiential retail and hospitality; if Covid has taught us anything it’s the need we all have for human interaction and sensory satisfaction, neither of which can be satisfied online. We saw clearly that even whilst Covid was still highly prevalent during 2020 consumers were desperate for a human to human experience and have been willing to take the risk; the longer we are subject to restrictions the greater the desire for this will be.
Therefore, once the vaccine has been rolled out we anticipate an initial surge in visits to stores and destinations of all kinds – most probably from Q2 onwards – supported by the savings that many consumers have been able to amass during the period of lockdown and restriction. Of course this does mean that retail stores could initially be competing with hospitality, travel and leisure for spend as these channels restart trading and consumers try to make up for lost time with friends and family. We also need to be aware that the demand by consumers may well wane as the year progresses, particularly if and when the furlough scheme ends and unemployment rises, but the hunger that consumers have for re-engaging with each other cannot be under-estimated and is not something that online alone can satisfy.
Notes: Diane has over 30 years’ experience in retail and is regarded as one of the leading experts on retail and retail destinations, with an unparalleled knowledge and expertise in understanding current and emerging retail issues and consumer trends. Diane regularly commentates on the performance of retail for national broadcast and print media, appearing regularly on BBC, Sky News and Bloomberg. As a founding director of Springboard (established in 2002), Diane specialises in delivering intelligence and insights on both current retail performance and long term retail trends to retailers, hospitality occupiers, landlords, investors and place managers, and was recently named as one of the world’s 100 top retail influencers in 2022 by Rethink Retail for the second year running.