This week’s edition is a report of day 1’s proceedings of the Retail Expo 2020. The Expo is one of the biggest events in the retail calendar, and while this year’s event was held online for obvious reasons, it was still an engaging event that left one with a lot to consider.
Mark Price, former MD of Waitrose and Deputy Chairman of the John Lewis Partnership kicked us off with his talk ‘A View from the Top – Creating a new vision for a new era of retail’. As the title suggests, this made for a wide-ranging talk drawing on Mark’s vast experience in retail and government. The talk was fast-moving and fascinating and well-worth watching in full, with topics covered including: how start-ups, universities, corporations and charities are handling the Coronavirus pandemic; how the online vs. high-street model of business might change in the near-future; an analysis of current consumer behaviour; further challenges on the horizon (Brexit and climate change.) The below is a discussion of some of the areas we found most interesting.
Mark assuaged this uncertainty somewhat by placing the chancellor’s recent borrowing announcements in context. He compared the borrowing figures announced (£60Bn to support the economy over each of the next three months, so £180Bn over the next nine months) against figures from the boom in 2007 and the height of the crisis in 2018 – a national debt of £500Bn in 2007, versus a debt in 2018 of £1.84Tn. The measures announced by the chancellor are a short-term help and should allow the economy to survive this phase of the pandemic, but there will clearly be challenging times in the years ahead. Of course, business has its role to play in this, with retailers contributing significantly. However, where historically businesses could, to an extent, pass on these costs to the consumer – now the discounters have a much stronger hold on the market, (in food their market share has increased from 5-6% 10 years ago, to around 13% now.)
Clearly this is going to be a challenge for retail to manage, especially as the last 12 months were already some of retail’s most difficult in memory. The government are going to have to look at reforms to business rates sooner or later if the high street is to stand a chance of thriving. Mark then moved on from this analysis of the past and the present to how things might look in the future. Customer habits are undeniably going to be changing after the pandemic, but it’s not yet clear how. One study of consumer behaviour in the US indicates that 25% of consumers won’t return to the high-street right away, whether due to concerns for their health, or simply their spending power is now reduced. If this is indeed a widespread trend then this poses difficult questions for UK retail. How does a company like Boots manage this sort of shift? Mark noted, they’ve increased from 700,000 prescription deliveries before the Covid-19 pandemic, to 1.5m deliveries now - hiring 500 drivers to do so. Are people going to return to the high street or will customers, typically the elderly one would imagine, now do the majority of their shopping online?
The reality is likely to be somewhere in the middle – whilst many customers will never return to the high street, a lot will be excited at the opportunity to return to the shops that are providing an experiential offering. Of course for retailers the challenges of store-rent, wages and business rates are still in the equation – hopefully there will be respite in some of these areas though. Similarly people’s use of local shops has massively increased as travel to out of town supermarkets has reduced. How will this continue in the near future? And will this drive for localism affect what path the UK chooses as we look to Brexit in 2021?
One can’t say what the reality will be at this stage, there are simply too many factors at play. Mark was able to offer some final advice though and wrapped up proceedings on an optimistic note: Like never before, businesses need to be offering their products at a great price; or to offer genuinely unique and superior products, with a great service – to command a premium price. Now is the time for technology and innovation, but we also need to be aware that the post-lockdown customer will be cautious. Hospitality brands and retailers will need to do everything they can to convince the consumer they’re right to choose their product or service.