RETAIL RAMBLINGS & REFLECTIONS - A YEAR IN REVIEW
Whilst we’re starting the new year in lockdown 3.0, there are reasons to be optimistic about the future.
We begin by reflecting on the “unprecedented” year that was 2020: one where Covid-19 and its impact on our lives, the economy and retail dominated the headlines. And which can be summed up by the “words of the year”, many of which were new to our vocabulary:
Coronavirus, Covid, lockdown, furlough, key worker, self-isolate, social distancing, WFH, circuit breaker, support bubbles, moonshot.
Non-virus-related words making it on to the Oxford English and Collin's Dictionary lists remind us of other events during the year including Black Lives Matter / BLM, Tiktoker, Megxit and bushfires.
Retail became defined as essential and non-essential, with most non-essential, physical, retail spending a large proportion of the year shut down and all impacted by Covid in some way. Brands and retailers were forced to focus on e-commerce and improve their omnichannel offerings in a socially distanced, Covid-world. The role of the store was redefined with online emerging as the clear winner. After all, 2020 was the year much of the high street was closed and we all shopped online.
The Centre for Retail Research expects online sales in Western Europe (UK, Germany, France, Netherlands, Italy and Spain) to grow to £294.2bn in 2020 (against an original forecast of £249bn): an astonishing 31% increase in a single year and an average online share of total retail sales of 16.2% in 2020 .
After a run of strong growth to October, the latest retail sales figures from ONS showed sales fell back in November as further national lockdowns impacted trade, despite extensive online Black Friday promotions. But overall? Monthly sales were above their pre-pandemic levels (+ 5.7% excluding fuel) and online retail rose to account for 31.4% of total retail, up from 28.6% in October and an incredible 74.7% year-on-year increase.
The other big news story of 2020 was the last-minute agreement reached between the UK and the EU for a post-Brexit trade deal for the import and export of goods. Billed as a free-trade deal, the reality is more complex. It’s a journey that took over 4 years, still requires much of the detail to be worked out and excludes services, freedom of movement and the Erasmus exchange programme. Welcomed by many, time will tell what the real impact of Brexit is for businesses, supply chains and customers. Whilst there appears to be little disruption in these early days, a number of retailers have temporarily suspended deliveries to the EU (ASOS included) whilst they work through the detail (particularly around the "rule of origin" clause) and some EU online retailers are no longer delivering to the UK following the change in VAT rules brought in by HRMC (VAT now being collected at the point of sale rather than point of importation).
RETAIL SNAPSHOT 2020 Whilst 2019 was crowned “the worst year on record for UK retail”, little did we know 2020 would throw a global pandemic into the mix and become the worst year for the High Street in more than 25 years. The Centre of Retail Research forecast total retail sales in 2020 will fall overall by 4.6% compared to 2019 (a reduction of £17bn) and will not return to 2019’s level until 2022. They also forecast the closure of over 20,000 stores and 235,000 job losses (compared to 16,073 and 143,128 in 2019 respectively). Their report on actuals as at the end of December 2020 are shown here.
Covid-19 has had a polarising effect on retail.
Those suiting and booting office workers in city centres, or generally dependent on their custom, have typically not fared as well. Whereas, grocery, leisurewear, value, discount and resale, home and garden, electrical and health and beauty categories (whether pureplay e-tail, multi-channel, or bricks-and-mortar only) have performed well overall this year.
Retailers with weaker digital capabilities and an over-reliance on bricks and mortar stores have been most exposed and hardest hit. Arcadia (over 400 stores in the UK) went into administration at the end of November, Paperchase (over 100 stores) filed a notice to appoint administrators early in January and Debenhams is in the process of being wound down after 240 years in business, with the closure of over 100 stores and loss of up to 12,000 jobs. Edinburgh Woollen Mill Group also went into administration and whilst deals have been secured to rescue some of the brands (Jaeger, Bonmarche), they do not include all stores and Peacock's future is still unknown.
Sadly, we said goodbye to some well-known brands on the high street (including Oasis, Warehouse, Cath Kidston, Laura Ashley) with some continuing to live on as online brands, or digital first with a significantly reduced store footprint under new owners (Cath Kidston, Monsoon & Accessorise).
KEY TRENDS IN 2020
The extent to which the pandemic has accelerated the speed of digital transformations and turbocharged the decline of the high street has been well documented. What may have started as temporary solutions are likely to remain part of our retail landscape. Five of the key recurring themes across retail in 2020 are summarised below.
1. Big Shifts in Omnichannel Onmichannel stepped up a gear as retailers rushed to expand their customer reach, online presence and service offering. The most notable shifts have been the growth in marketplaces, an increase in social selling and the expanded role of physical stores. Highlights include:
The Range (180+ stores across UK and Ireland and reaching over 15m customers per month) is set to launch an online marketplace in another challenge to Amazon, allowing “trusted” third-party retailers to list items and reach millions of new customers. Sellers can operate on commission-based fees or as wholesale. It is positioning itself as a simple, transparent alternative to its rivals; providing exclusivity rights with no setup, subscription or monthly fees.
Hamleys’ is launching its entire range on Ebay’s marketplace for the first time, joining a growing number of household names using the platform.
Europe and UK-based retailers can list their products on Google Shopping for free according to The Telegraph. This means the majority of search results on its Shopping tab will be free to help retailers and support the continent’s economic recovery.
A recent study "Swipe up Shopping" carried out for Visa revealed almost a fifth (17%) of Brits are using social apps to shop, with 1 in 10 making a purchase this way since the first lockdown began in March 2020. Social media-fuelled purchases accounted for 1 in 4 (24%) online purchases in the 6 months following the first lockdown, with clothing and accessories being the most popular purchases (37%), followed by homeware (29%) and electronics (20%).
Pinterest has a goal to make every pin shoppable and has expanded the number of shopping tools available to users in the UK. This includes more places to shop via its site, visual search retail functionality and ads.
Instagram turned 10 in 2020 and is on a mission to become one of the most popular DTC e-commerce platforms with the ongoing development of its direct shopping and checkout functionality on IGTV, Instagram Live and Stories.
There's a constant stream of retailers announcing new developments and partnerships to expand their omnichannel offering and repurpose the use of physical stores. Examples include click and collect, enhanced delivery and returns options, in-store pop-ups, as well as using stores to fulfil online orders. We’ve also seen a resurgence in shopping locally and independents doing well, as many of us spend more time working from home and rediscovering our local high streets. Post lockdown we expect high street retailers will continue to evolve the in-store experience to capture the pent-up demand for physical retail and attract customers back in a Covid-world. In the meantime, a number of retailers are offering their closed stores as vaccination centres in the collective fight against the virus.
2. Greater Use of Technology
Tech deployment continued at a pace with retailers rolling out a range of tech to enhance their service offering and acquire and retain customers in a Covid-world. Examples include virtual and interactive shopping services, queue management and bookable shopping slots, checkout free shopping and mobile payments, online fit and sizing technology and the increasing role of video.
MADE.com launched a shoppable, interactive VR experience to showcase its latest collection. The virtual apartment allows shoppers to click on items and explore further. The company has also launched an AI-powered image search tool dubbed "shop your photos" - customers can upload photos of products they like and see a curated selection of closest items in Made's collection.
G-star Raw introduced Apple's App Clip tech in stores to merge online and physical store worlds. Using the Highstreet Mobile mobile shopping app platform, customers can instantly bring up information about any products in a G-Star shop by scanning a QR code or tapping an information tag on mannequins. Information includes price, colours and sizes available both in-store and online, while items can be ordered directly on-line and a mobile payment made via Apple Pay. App Clips gives access to part of the G-Star app without customers needing to download the full app.
Ted Baker has partnered with Hero to launch virtual shopping across its store estate, allowing customers to message and video call store staff in real time for personalised recommendations and answer questions. Customers can purchase from the retailer’s entire stock collection and arrange a one-on-one appointment with staff in-store.
M&S and John Lewis were amongst the first to offer bookable shopping slots, enabling customers to skip queues on the day.
Muji has a new mobile self-checkout solution in UK stores using Mishipay's Scan Pay Go tech. Shoppers can also use it to check prices, view additional items and real time promotional information.
Zalando announced the acquisition of Swiss computer vision technology company, Fision. The business has a body scanning app and virtual dressing room product that enables online customers to see how their garment would fit on their body prior to purchase.
You Tube could soon become a shopping platform, enabling viewers to purchase items featured in videos directly from retailers and creators with the Merch Shelf feature.
Google has begun testing new tech which would allow content creators to tag items within their videos, then sell them directly to customers via integrated tools from Google Shopping.
Footasylum is using video to build its brand and create engagement by launching a YouTube show called Locked In that it hopes will entertain its core demographic, generate a loyal following and help it sell more in the process.
3. Changes in Consumer Behaviour
Digital engagement continued to rise as consumers shifted online in their droves, including a new group of customers shopping online for the first time. Other changes seen during the year include:
Mobile commerce increased; it is the fastest-growing segment of the retail sector in the UK, US and Western Europe.
Direct-to-consumer sales rose.
Loyalty was challenged as many consumers tried alternative retailers to meet their needs (value, availability and convenience).
Conscious consumerism, with a greater concern for community, sustainability and financial security, shifted the focus to resale, slow buying and supporting local businesses.
Use of flexible payments increased (Paypal are the latest provider to enter this market with the launch of “Pay in 3”).
Whilst the pandemic initially led many businesses to focus on their immediate survival, it also thrust ethical principles, sustainability and values into the spotlight. Let’s not forget this was the year “dark factories’ in the UK (Boohoo and Leicester in this case) were uncovered, and concerns about poor working conditions, pay and modern slavery hit the headlines.
Many leading global players have responded by investing in initiatives to support a more circular and sustainable economy, including recycling programmes and launching marketplaces to sell used clothes. We hope, like many, the renewed energy and deepened consumer engagement with doing the right thing, sustainability and a circular economy serve as a foundation for building back better.
5. Data Driven
Data has become synonymous with digital transformation. Having data is one thing and most retailers have vast amounts of it. However, data that can’t be accessed easily, or is unreliable or out of date, has limited value.
Operating successfully in retail today requires a single view of stock, customers and product across all channels, plus advanced, on-demand, real-time data analytics capabilities; enabling more effective acquisition, targeting and retention strategies, and modelling and personalisation. The prize is a big one – those that have elevated their data architecture and strategy to the level of business strategy and use data insights to increase efficiency, revenue and customer engagement, are more likely to outperform those that don’t.
Take The Hut Group or Gym Shark’s stellar growth for example, both of whom floated on the London Stock Exchange in 2020. Data is at the heart of everything they do.
In other news, Amazon rolled out its Shopper Panel App in the US to encourage its customers to share data on their non-Amazon purchases in exchange for a monetary reward. At it's core is a data collection programme to inform its own product development and ad placement on its platform. It really is all about the data!
LOOKING AHEAD - A BRIGHTER OUTLOOK BUT RECOVERY WILL BE GRADUAL
Despite a renewed sense of optimism with the approval and rollout of Covid vaccines, there’s no doubt the latest lockdown is a serious blow for many businesses. Recovery is in sight, though the path remains uncertain and the economic recovery is likely to take longer than previously forecast. Governments are extending business support as economies continue to recover from Covid-19, although the end of business rates relief and furlough is currently on the horizon.
What it means for retail and the wider economy remains unclear, although many are forecasting a tale of two halves, with a stronger second half and positive growth overall. We expect the momentum in digital growth, tech developments and data insights to continue as onmichannel adapts to evolving consumer behaviour, including more cross-border commerce.
And finally….Pantone Colour of the Year 2021
We wanted to end with Pantone’s colour of the year, or rather 2 colours for 2021; Ultimate Gray and Illuminating. It’s a message of happiness supported by fortitude and encapsulates the current mood of strength and positivity. To quote Pantone, “we need to feel that everything is going to get brighter as this is essential to the human spirit”.
Here’s to a happy and much brighter 2021 for everyone!
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