The last decade has been a period of extraordinary change for retail. Digital transformation and evolving consumer behaviour have seen more of us shopping online than ever before.
Prior to coronavirus, the proportion of retail sales made online had grown from 5% in 2008 to 19% by March 2020. Coronavirus accelerated this change. When many stores were forced to close, online retail became a lifeline for us all with one in every three pounds – from food to fashion – spent online in May.
So, who is this new consumer that has emerged from the shadow of coronavirus?
The new consumer is digitally savvy; the new consumer makes cautious purchases; the new consumer is ethically conscientious; and now more than ever, the new consumer values safety.
This is good news for the future of retail, but economic uncertainty and rising unemployment has meant that consumer spending is currently balancing on a knife edge. The potential for future lockdowns or other economic shocks could quickly bring the first steps of recovery to a shuddering halt.
Footfall on our highstreets and our shopping centres has not improved, and it may never return to pre-coronavirus levels. There is also little sign that the double-digit growth in online sales will slow anytime soon, especially as the pandemic has given rise to a new group of online shoppers with many older people turning to e-commerce that had not before.
It has never been more crucial for retail businesses to develop an omni-channel offering for their customers, blurring the lines between the digital and the physical.
Many retailers have been investing hundreds of millions in effectively integrating their online and offline offerings.
Retail is no longer simply online versus offline, bricks versus clicks. With eight out of the ten top online retailers having a presence on our highstreets, the two are increasingly intertwined.
This shift to online means that over the next twenty years there will likely be fewer shops, and fewer retail jobs. The jobs that remain will be higher skilled, and better paid. We already have 100,000 people in jobs today that didn’t exist a decade ago: influencer managers, social media experts, data scientists – who knows what other roles the future may hold.
But, for retailers to invest in this technological transformation, with slicker online services and an upskilled workforce, they need capital. For retailers to operate stores, they need a sustainable cost base. Unfortunately, with the cost of coronavirus bearing down, especially for those who have faced periods of closure, resources are scarce. Which is why, now more than ever, decisions made by government will be critical in moulding how retail can adapt.
Without it, the landing will be hard, with unnecessary job losses and store closures we have already seen the job loss tally mounting up. While government support throughout the pandemic has been generous, many shops are still struggling to stay afloat and are shouldering months of unpayable debts with rent bills stacking up.
With the second round of forced closures put in place during a peak trading month, coupled with low demand, too many retail operations are still at risk of becoming unviable. The BRC has long been calling for measures to manage the current burden of costs and create a more sustainable tax system for retail.
First, the Government must fundamentally reform the business rates system which disproportionately affects retail businesses; secondly, it should not consider any new form of online taxes on an already overtaxed industry and which ultimately would impact consumers; and thirdly, it must extend the moratorium on rent arrears enforcement beyond January.
Without this, retailers face higher costs, more disruption, and their chances of investing in the digital transformation and providing much needed new jobs, vital for their future, will be dashed. One thing is for certain, and that is that the future is uncertain. Retail will remain resilient and will adapt, but the government must be accommodating.
Like it or not, the rules of retail have been permanently rewritten. We do not want to fight this change, but rather embrace it.
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