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Retail reflections and resolutions for 2021

21 Jan 2021

Senior Consultant Edward Jobson reviews the contrasting experiences of bricks-and-mortar, pureplay e-commerce, and multi-channel retailers over the key festive shopping period; and takes a look at what these retailers face going into 2021.

In retail, as in life, January is a time for reflections, resolutions, renewal and predictions.

Hello and welcome back to This Week in Retail. As Nick Hoenig wrote in last week’s TWIR, January is, in normal times, a quiet trading month which affords retailers a moment to dust themselves down after the chaos of the Golden Quarter – which has evolved in recent years to resemble an annual shopping jamboree stretching from Black Friday to pre-Christmas shopping and all the way through to Boxing Day sales. While things are certainly different this year, we are still seeing the usual post-match analyses (or post-mortems in some cases) of the Christmas trading period rolling in as retailers announce their December results, and the full picture for Q4 and the year comes into focus.

A tale of two Christmases for bricks-and-mortar and e-commerce

While there was plenty of festive cheer for multichannel and pureplay ecommerce retailers, their brick-and-mortar cousins are feeling the Christmas hangover like never before, with physical stores severely curtailed during the second national lockdown in November and then the ratcheting up of tier system restrictions in December. Looking at the big picture, overall retail sales in 2020 have been widely reported as the “worst in 25 years,” thanks to the pandemic. But a closer look at the numbers tells a slightly more nuanced story. Retail sales fell 0.3% in 2020, which is in fact the biggest (and only) drop in annual sales since the British Retail Consortium began compiling detailed figures back in 1995. This figure is certainly a cause for concern, although not unexpected, but it is not quite the same as the worst sales figures in 25 years in absolute terms. For December, total retail sales actually grew 1.8% YoY, fuelled by strong sales in grocery due to the extended closure of the hospitality industry.

While sales of non-food items in physical shops collapsed by 24% across the year, total online retail sales grew a staggering 36%, according to the IMRG Capgemini Online Retail Index. The boom in online has fuelled a number of success stories, including The Hut Group, Very and Asos, to name but a few. Notably, multichannel retailers performed better than their pureplay counterparts for the first time since 2017, with growth of 57% and 9% respectively, hinting that the benefits of maintaining a physical store presence despite the pandemic will likely remain a key differentiator in 2021 and beyond.

Hope for physical retail at the start of 2021?

There is no escaping the fact that the pandemic has been a disaster for physical retail. Primark is warning of a £1.1bn loss in sales if its stores remain unable to open until the end of February. Meanwhile, Topshop remains under administration following the collapse of Arcadia, and is circling the drain unless a white knight can be found. But there are some glimmers of hope for physical retail. We have sene the pandemic accelerate a number of pre-existing trends – could the long-awaited transformation of the physical store be another? When we eventually emerge from lockdown (again), we could see the physical store truly transformed to meet the needs of the post-pandemic consumer.

Here’s a few exciting examples of store innovation to look forward to in 2021:

  • Capgemini is teaming up with The Drum and SharpEnd to launch an innovation concept store in Shoreditch called Cornershop, exploring the future of brand and customer engagement in the ‘new normal’ of contactless experiences using live demos of cutting-edge in-store technology.
  • French retailer Monoprix is looking to ramp up its micro store portfolio, an automated 24/7 ultra-convenient format that has thrived during lockdown.
  • Just prior to lockdown, The Latest launched a new concept store in Berlin, providing a physical showcase space for digital start-ups, products and apps, featuring curated promotions from an in-house digital visual merchandising team. In 2021, they have plans to expand to the UK and China.

January is also of course a time when retail consultants and pundits love to set out a series of bold predictions about the year ahead – surely this year will be the year that drone delivery really takes off(!). If 2020 was anything to go by, we are in for another unpredictable year in 2021, to say the least. With this in mind, our pragmatic Capgemini Retail Supply Chain team have put their heads together and picked out the key trends, technologies and issues that we see shaping up 2021.

Have a good week and stay healthy,