Risk v. confidence: what will retail look like now?

This #LearningFromCrisis guest Spotlight is adapted from a 16 June article by Montagu Evans Partner Rob Asbury, whose focus is on the retail and leisure markets.

According to Retail Economics, in 2019 UK retail sales were just under £400bn. A third of all consumer spending was from retail and almost 3 million people were employed directly in the sector. Of those sales, 19% were online in 2019, rising to 30% in 2020 (year to date), including lockdown from late March. Judging by the news stories and images of non-essential shops opening on Monday, the UK still clearly loves to shop ­– and not just online.

People queuing outside retail outlet wearing masks
Photo credit: https://www.bbc.co.uk/news/business-53044826

Most of us like the energy that only a visit to a physical outlet can provide. The interaction with people. Being able to touch and feel a product, and try it on. Asking friends or family shopping with us for their opinions. As crazy as it seems to some, many are prepared to queue, jostle and bundle our way into shops to get our fix, despite the risks of the pandemic.

Retailers now have to find ways to offer what consumers want from ‘live’ shopping while minimising risk. This means balancing reduced in-store capacity and handling of merchandise against the economics of running a store profitably, with undoubtedly fewer sales to offset the significant outgoings of staff, rent, rates and so on.

Some stores can be loss-leaders, sacrificing profit for location, profile or other benefits. But no retailer can run a whole portfolio of loss-leading stores unless its internet sales are strong enough to sustain this long term, and very few have that.

So how can retailers make sure their stores stack up in a socially distanced world?

Should retailers carry less stock or fewer lines, concentrating on ‘theatre’ and connection with the brand, while leaving mainstream sales to their internet portals? Should they separate click-and-collect functions with different entry and exit points, or even separate them from the main physical store?

One national fashion retailer is looking at putting click-and-collect pods in supermarket car parks to deal with internet sales and returns. Customers wanting a shop experience would go to the nearest large town, city or retail park, where parking may be easier and the retailer can control social distancing more effectively.

Another distancing option involves customers making appointments to visit stores and being served by a dedicated sales assistant. But is this realistic for value retailers like Primark or Sports Direct, who rely on mass market high footfall and regular visits?

It may be impossible to agree on universal measures. Since shops re-opened on 15 June, we’ve seen that consumers – and the retail workers and passers-by they interact with – ­­have widely varying perceptions of risk versus reward. For some, precautions aren’t that important, but retailers have a responsibility nonetheless – how far they go depends on their own risk appetite, and how attuned they are to their customers. As we adjust to this next stage of Covid-19 life, one size definitely doesn’t fit all.

To get involved in the #LearningFromCrisis programme, contact Lisa Taylor.

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