Our latest sector blog looks back at the key discussions raised in our last Retail Forum
Retail Reflections
Aimee Barrable
Not a day goes by without an announcement or some commentary on the retail sector and the impact Covid is having on an industry which was already facing challenges before the global pandemic hit. We've all been surprised by some of the names that have disappeared from view, both in retail and its closest pal, leisure, and it's fair to say that we'll see a much-altered retail and leisure offering in a post-Covid world, when that finally comes.
Recently, I was joined by a group of retail professionals for a lively debate reflecting on their experience of the re-opening of what were classed as "non-essential" shops. At that point, we'd had the 2 metre rule reduced to 1m plus, so-called "Super Saturday" - which saw the re-opening of hospitality (and the unsurprising revelation that drunk people find it difficult to socially distance!), a local lockdown in Leicester as cases rose more sharply there, and additional financial support – through job retention bonuses etc - being announced by the Chancellor.
More recently, some leisure and parts of beauty have had their opening dates and I was delighted to return to the gym after too much lockdown indulgence.
As the Covid retail story continues, here are my thoughts on a few key areas.
Much of the reporting on re-opening suggested that things were, to put it simply, tricky. June figures circulated in the media suggested that footfall was down almost 60% compared to June last year – down 81% in London due to the total lack of city workers who also form the backbone of the commuter economy - and the BRC commented that we were lagging behind other European countries in terms of our retail recovery.
That being said, there was some "revenge shopping" once we were let out like angry kids after having been grounded! There was clearly some pent-up demand for a certain low cost fashion retailer – you'll have seen photos of the queues – and also in certain demographics. The lure of some designer threads or new trainers and the desire to hang out with mates after months of being stuck indoors saw many of the younger generation keen to get back to the shops, clearly illustrating the significance of the social side of the physical shopping experience for what's probably the most tech-savvy generation.
However, in more general terms, a large proportion of those who have returned to UK stores have found the in-store experience less enjoyable than before; they find the queuing system inconvenient and generally miss the spontaneity of things, but I've also heard of those who've enjoyed the slightly more stripped back and controlled environment, appreciating the lack of bustle and fuss which can often surround a shopping trip, and the extra levels of hygiene.
This season's must have fashion accessory – the mask!
When you're about to host an event or deliver some training, there's nothing better than a last minute update to provoke discussion and the Government gifted me the introduction of mandatory masks in the week we were to host our retail forum!
Many retailers had geared up for their staff to be equipped with varying levels of PPE and for the installation of Perspex screens, in order to provide protection. This was probably strange enough for people to get used to...and then came the requirement that shoppers wear face coverings.
There were concerns about who would police this and the possibility that it would pose issues in terms of security, and inevitably there's been some backlash and an element of (dare I say convenient) confusion but by and large, the general public seem to be following the rules.
"Fear is one of the main reasons people are reluctant to return to the shops so whatever can be done to help alleviate that in some way is going to be beneficial and it's suggested that those brands who are implementing covid safety measures – and shouting about it – are doing well. I personally have a collection of 4 masks so I'm equipped for pretty much any occasion!"
Bricks v clicks – that old chestnut!
Obviously the bricks versus clicks debate has been ongoing for some time, with a greater focus on the in-store customer experience and giving something more than what's offered by the rather solo, but undeniably convenient, act of online shopping. The suggestion is that Covid has accelerated the growth of online retail by years with some citing a seismic shift in purchasing patterns as people adapted to being stuck at home.
There was a great upsurge in online investment across the board as many companies took the plunge into an online arena they'd previously shied away from, considered too difficult or inappropriate to their business, or maybe just generally been slow to embrace. Federation of Small Businesses research suggests that 16% of SMEs increased online presence as a response to lockdown and the picture was similar with micro-businesses who turned to the internet as a way to generate sales.
This online presence provided a platform for brands to get noticed, particularly using social media channels which were being pored over by the masses in what we can't help but call "unprecedented times". The majority will continue with that as a sales technique.
So, is this the end of the physical store?
I don't think so, not entirely – well I have to say that as a property lawyer! Whilst the news is awash with store closures, the headlines don't always reflect what's likely to be happening behind the scenes. Of course there will be a shedding of stores where this can be done as it provides immediate cash savings both on rent and rates, so those with fortuitously-timed break clauses or reaching lease expiry will be seriously assessing store viability with a view to deciding whether to grab that exit route.
"However, Covid has forced a more general assessment of property assets and their use, and new concepts are springing up which align with this notion of immersive all-round customer experience and which link to the online offering."
Some retailers feel that they may actually need more stores to drive growth in digital but the two need to interconnect and can't just be versions of each other. Retailers now have an even bigger challenge to make their physical in-store experiences so compelling that people want to visit despite their exposure to potential health risks.
At our retail forum in July, we discussed how some types of stores were faring better than others: perhaps unsurprisingly, the out of town retail parks, which offer convenient parking outside, were trumping their inner-city cousins who were impacted both by offices and other businesses remaining closed, thus reducing footfall, and by an element of fear in using public transport to get there.
Garden centres have also proven popular, perhaps in part due to their layout and also due to a new-found love for gardening that Alan Titchmarsh would be proud of, while Ikea reported successes during lockdown as so much time spent in the confines of the home meant that we had no excuse not to finally get round to doing jobs we'd previously lacked the time, or perhaps actually the inclination, to sort! Surprise surprise, desks and tables were a popular choice but children's products also saw decent sales levels. Kurt Geiger saw a demand for men's slippers!
Whatever the location or the product, stores which are evidently taking safety very seriously are winning favour but it's tough out there and implementing very visible measures comes at a cost particularly in terms of additional staff and equipment.
Shop local?
"Mary Portas suggested that this period might represent an opportunity for a high street revival as more people were shopping locally during lockdown."
As many continue to work from home, I've seen various accounts of high streets brought back to life. The MD of Whistles commented that she was truly conflicted when she saw a bustling local high street while her stores in central London were struggling due the huge reduction in footfall in the City. Only time will tell as to whether the much talked about trend of agile working will continue and therefore whether local centres will continue to enjoy this new lease of life.
Imminent changes to the planning regime, which make it easier to repurpose premises, may also bolster this reinvigoration of the high street. This planning shake-up isn't without its critics, particularly in connection with the permitted development rights around home-building but a use class system - which introduces a new and wide "commercial, business and service" use class - will allow typical uses on the high street - like shops, cafes, professional services and offices – to be swapped without specific permission, therefore allowing owners to more quickly respond and adapt to changing trends.
I can see this being useful if we see a shift towards a sort of "hub and spoke" approach which sees people only going to the big cities, or the "hub", when they need to and spending a good chunk of time at home or in local office spaces, in the "spokes", that they can walk or cycle to. This, of course, plays to the ongoing sustainability debate - cue the photos of the clear skies during lockdown while we were all stuck at home – and the Government's latest drive to get us moving more because Boris says we're all fat!
Joking aside, although it's not always going to be feasible and there will of course be geographical variances, I can see some merit in having mixed-use local spaces where businesses perhaps use shared spaces rather than having their own dedicated office, and where there are local facilities which provide a lively business community in what may have been a slight ailing high street or other area.
Before March 2020, most people had never heard the word furlough but it has now been etched in public parlance as the Government's scheme propped up a huge chunk of the economy, reportedly assisting with the wages of 1.6 million retail employees in particular.
As it winds down, we'll inevitably see more jobs lost, particularly if this coincides with a second spike. While my initial thoughts on the furlough bonus scheme – which sees employers paid £1,000 per furloughed employee still employed at 1 February 2021 – were quite sceptical, our forum discussions suggested that funds could be used for training purposes and to bridge any skills gaps.
Also of note here is the fact that some businesses who've been able to afford to do so, e.g. IKEA, haven't taken advantage of the furlough scheme and Primark has openly said that whilst it made use of the furlough scheme it will not apply for the job retention bonus.
Is it too early to think about... Christmas?
In more usual times, it's likely that retailers would have everything planned out for the run-in to Christmas so while we enjoyed our summer holidays, they would be thinking of tinsel. This year is clearly going to provide its own unique challenges.
"Boots' chief marketing officer said that this will be a "Christmas like no other" and suggested that flexibility is going to be key in order to be able to react to changing circumstances."
We don't really know where we'll be in terms of the medical side of things, if we'll be in or out of lockdown (locally or nationally), what consumer shopping habits and confidence will be at the time...the list goes on and there is a whole host of different factors to consider and weigh up:
The furlough scheme is beginning to wind down but the retention bonuses have been introduced.
In terms of rent payments, with reduced footfall, the uncertainty of a second wave and the threat of local lockdowns, payments will continue to be challenging in many instances.
The moratorium on a landlord's ability to forfeit runs until the end of September and there's been a great deal of discussion about landlords and tenants needing to work together to find a way through this.
We have a new code designed to assist landlords and tenants in those discussions – although some commentators have suggested it's rather toothless.
For more information on this update, please contact Real Estate Principal, Aimee Barrable.
Our next Retail Forum
Our next session is running, via Zoom, on 17 September and promises to be an another interesting hour or so spent talking about all things retail – with a focus on the coming months and some data insights thrown in.
If you'd like to find out more and book your place, click here.