The retail sector was particularly affected by the arrival of the novel coronavirus in early 2020. Non-essential businesses were forced to shut almost overnight – and even the essential ones had to put up with a series of damaging restrictions.
A year later, we’ve got time to reflect on the current state of play for the sector – and to think about what the future might hold for it.
The shift to online
As a result of the restrictions, the e-commerce sector has exploded. While ONS figures reveal a steady climb in e-commerce as a proportion of total retail sales, which stretches back to the mid-2000s, it shot up to 36% as a result of the pandemic.
Some businesses have been able to make the transition to online relatively smoothly, while others have fared less well. According to a report by PwC, there has been a record net decline in stores, a record number of closures, and a record slump in store openings. The researchers, somewhat ominously, predict that the situation is ‘likely to get worse before it gets better’.
How are Businesses Coping?
The effects on business are not entirely related to customer footfall. Some are subtler and rooted in psychology. Polling by Nucleus Commercial Finance has found that an incredible 54% of SME leaders believe that “their feelings towards the current lockdown are having a negative impact on all aspects of the business”. Conversely, just 8% claimed that they ‘feel supported’.
Chirag Shah, the Chief Executive of Nucleus, is quick to recommend that businesses seek help during times of struggle: “Businesses now more than ever need access to support, whether that be financial, mental health or practical, to help them through the tough times ahead. While the picture is looking brighter with the mass rollout of the vaccine, it is never too late for business owners to engage with support groups.”
What about the Budget?
Rishi Sunak used the recent budget to announce a raft of measures designed to support business during the transition back to normality. Among the flagship policies were an extension of the business rates holiday, and £5bn put toward ‘restart’ grants for shops reopening after lockdown ends. The furlough scheme was also extended.
Reaction to this from the business world has been mixed, with most claiming that the support does not reflect the seriousness of the emergency. This kind of measure will do little to reverse the more fundamental change driving the retail sector: the behaviour of consumers. Many have gotten into the habit of making purchases through online retailers like Amazon and eBay – and polling suggests that a significant chunk of customers will not return to their previous levels of in-store shopping, even after the restrictions have been entirely lifted.
It is a near certainty that e-commerce will accelerate following the pandemic. While we might see a little bit of a swing back to brick-and-mortar after the lockdown ends, age demographics spell good news for online retailers: the people most looking forward to going back to the shops also happen to be the oldest.
Social commerce is another trend to keep an eye on. Platforms like Facebook, Google and TikTok have all become incredibly brand-centric, and their stranglehold over our attention is only likely to tighten. Forward-thinking retailers should therefore look to maintain a presence on multiple channels if they want to thrive.