Light at the end of the tunnel: retail’s roadmap out of lockdown

Like any consultant worth their salt, I love a good roadmap. So too, for that matter, do most of our retail clients. And so, along with the rest of the nation, I can well imagine that retailers the length and breadth of the country breathed a sigh of relief this week – and maybe even allowed themselves a muted moment of celebration, as the UK government unveiled its roadmap out of lockdown.

I’m pretty sure that most of our readers will already have the key dates in their calendars circled and double-underlined in bright red felt tip, but let’s take another quick look at the roadmap and what it means for retailers.

• Step 1: Footfall to essential stores may increase slightly with the limited easing of restrictions on local travel expected during March, although the shutters will remain down on non-essential stores. We can expect at least a few more weeks of bleak high street trading, with sales continuing to seep into online channels.
• Step 2: Non-essential shops will be able to reopen from April 12^th. While brick-and-mortar retailers will be grateful to finally have a bit of certainty with a date in the diary, some will rue the missed opportunity to open during the usually busy trading period over Easter, particularly after such a difficult Christmas. Initially, there will be strict limits on the number of people allowed in a store at one time. Expect more queues despite footfall likely remaining low.
• Step 3: Social distancing rules are due to ease on May 17^th, but the impact on stores and indoor venues is uncertain. As we now know from experience, the details are important. Asking shoppers to remain one metre apart means being able to operate at approximately 70% capacity, while two metres reduces that to about 25%, making physical store retail much less viable.
• Step 4: All being well and pending reviews, June 21^st is in theory “the light at the end of the tunnel” that we have been waiting for. If the last year has taught us anything however, it is to expect the unexpected. Retailers should therefore remain wary and continue to develop operational flexibility that will allow them to pivot back to online channels and alternative business models as and when required.

On the theme of not getting too carried away, with the end of the financial year approaching in April, the full cost of the pandemic is dawning for many retailers. John Lewis, H&M and Mike Ashley’s Frasers Group are all anticipating big losses. Large retailers like these will have to look again at their store estates. Expect further announcements of store closures, or repurposing stores to serve online fulfilment. For example, John Lewis is set to shed 8 of its current 42 stores, having forecasted that up to 70% of its sales will come via online channels by 2025. This last figure alone demonstrates the dramatic acceleration in the shift from physical to online retail driven by the pandemic.

Let’s keep positive. A pent-up economy emerging from lockdown should prove fertile ground in particular for multichannel retailers who have managed to sustain or grow during the pandemic through the development of innovative online business models, and will now be able to leverage their physical channels as well. Meanwhile, pureplay ecommerce retailers, such as ASOS and Ocado, are well set to sustain growth despite the reopening. Both have made smart acquisitions recently to bolster impressive performance during lockdown. ASOS is due to launch a huge campaign across YouTube, TikTok, Snapchat and Instagram to coincide with its recent acquisition of Topshop and Topman from Arcadia earlier this month. It will be interesting to see if ASOS can refresh and revitalise what was becoming a slightly tired millennial brand, perhaps by reaching out to a new Gen Z audience via social media channels. Meanwhile, Ocado continues to go from strength to strength, having snapped up a string of tech start-ups dealing mainly in robotics and AI, as it looks to develop its smart platform technology services alongside its online retail business and collaboration with M&S.

Thanks for reading,

Edward Jobson

Senior Consultant, Retail Supply Chain (Operations Transformation)

Ed has a proven track record of helping multiple major international retailers through large scale business transformation programmes, with a strong interest and recognised expertise in Business Process Design, across Grocery and GM.