Covid-19 has upended the world. The New Normal is a 10-part series, published daily at 6am, looking at the dramatic ramifications for the world of economics and business. Part four examines examines the impact on the high street
When the British Retail Consortium lamented in January that 2019 had been the worst year for retail in a quarter of a century, it could have had little idea what the following few months would hold.
High streets quickly became one of the major casualties of the coronavirus lockdown and the roll call of troubled businesses as the UK emerges blinking into the autumn reads like a list of the great and the good of British retailing: Marks & Spencer, Debenhams, Monsoon Accessorize, John Lewis and Laura Ashley are just some of the long-standing brands at the very least bruised in the past few months.
Even after non-essential shops were allowed to reopen in mid-June, consumers have been hesitant to return en masse, although footfall is beginning to improve. Figures released by Springboard this week showed shopper numbers across all retail destinations rose by 4.1pc last week – although still about a third lower than last year.
As he revealed plans for a restructure, M&S boss Steve Rowe warned some shopper habits had been “changed forever” by the pandemic.
There have been two fundamental shifts, explains Kien Tan, senior retail advisor at PwC: what we’re buying and where we’re buying it – and these changes are likely to persist for at least the next couple of years. Brits were already enthusiastic about online shopping compared with our European counterparts, but figures from the Office for National Statistics shows a spike in internet retailing in May, when 32.8pc of all goods were bought online. The figure was just 18.8pc in the same month last year.
“It took us 10 years to get from 10pc to 20pc internet penetration, and about two months to get from 20pc to 30pc,” Tan says.
Putting aside grocery shopping, he says the most surprising change is the speed at which the UK has embraced buying fashion online – a move helped by shops not allowing customers to try anything on.
“Coronavirus meant many people tried online shopping for the first time,” says Kyle Monk, director of insights at the BRC. “While some of these people are already returning to the high street since lockdown ended, others are likely to continue with this new habit, giving online shopping a permanent boost into the future.”
So is this move to online the end of Britain as a nation of shopkeepers? Far from it, says Mat Oakley, head of European research at Savills, who suggests that the pandemic has done little more than accelerate what was already underway in the sector. In fact, he predicts independent businesses that consumers have come to rely on during lockdown could be a surprising beneficiary.
“I think a lot of people have rediscovered their local shops during the last few months,” he says. “Rather than shopping while they are at work, or getting in the car and travelling to their nearest large town, they have realised that there is quite a good local shop for something – and they feel good going there too.”
According to Global Data, almost one in three consumers plan to visit local shops more frequently than they did before the crisis. This, coupled with longer-term changes in how and where people work, could benefit smaller urban hotspots and suburban high streets, Oakley points out – but is likely to have a devastating impact on destination shopping areas such as the West End.
White collar workers in particular are unlikely to return to their previous patterns of spending five days a week in an office as a new era of more flexible working emerges.
At the intersection of greater use of online shopping and a desire to support independent businesses are third-party operations such as Pinga, a shopping and delivery app that enjoyed a surge in users during the pandemic. The app enables users to request items from shops, cafes or takeaways on their local high street and connects community members who can shop on their behalf and drop off on their doorstep.
Michael Goulden, one of Pinga’s co-founders, says he wants to offer a viable alternative to Amazon. “We estimate at least 60pc of what you order from Amazon is available in a shop two kilometres from where you live, through an independent store or a big branded retailer, but you currently don’t know whether it’s in stock or if they deliver,” he says.
The app allows customers to search for a product, locate it in a local store and purchase it for same-day delivery.
Pinga embraces is Don Williams, retail partner at KPMG, calls a “move to ease”: consumers increasingly want to shop whenever and wherever they feel like it. “This is about how simple it is to interact with the product," he says.
To survive in a post-Covid world, retailers will need to improve their supply chains, and focus on building an intimate knowledge of their customers, increasingly relying on data analysis rather than old-fashioned “gut feeling”, he adds.
And if how we’re buying goods has shifted, so has what we are buying: household goods have already seen a big recovery in sales as people spend more time in their homes. Accordingly, retail parks, where customers can drive up to shops and which are home to a large number of DIY and furniture stores, have bounced back more quickly than high streets.
“Clearly some retailers have been in distress, but that is an acceleration of changes that were happening before,” Tan adds.
That said, the spectre of rows of empty shops looms large. “There is always some segment ready to take up excess space,” Oakley says confidently. “In the late 1990s and early 2000s it was mobile phone shops. After the global financial crisis it was coffee shops.”
About 100 councils are waiting to find out if their bids for a share of £1bn of government money to help struggling high streets will be successful. A number plan to use funding for events such as food markets, street festivals and live music intended to draw crowds back.
Roger Hawkins, founding partner of architects Hawkins\Brown, says it is these initiatives that could save high streets from becoming economic wastelands. “New, more resilient uses will inevitably start to take the place of vulnerable ones, accelerating the transition towards more experience-oriented high streets, where leisure, culture and employment uses play an increasingly important role,” he explains.
Tempting people back to the high street may prove difficult, but the retail sector can achieve much by meeting consumers where they are – which for the next year at least, is likely to be mostly at home.
Read part one: Central banks prop up the world after Covid – but who pays?
Read part three: How the pandemic has radically altered the flow of money