The release of the April 2020 retail sales figures from the Office of National Statistics confirms the concerns that commentators and politicians expressed throughout May.
The previous figures for March had already set the scene. With only one week of lockdown included in the previous month, the 5% fall in retail sales was the greatest drop in 20 years. This signal towards the full economic impact of the pandemic is even more stark as it included a 10% increase in sales at food stores. The warning in these numbers being that the impact will be felt unevenly and at different times by different sectors. With the high demand created by panic shopping another record was set in March, with the strongest growth ever recorded in the food sector. March also served as the opening chapter in recognising the scale of the challenges being faced. Businesses from all sectors began to learn the new but unspoken economic rules tied to enforced social distancing.
The rise of global innovation
The global innovations that emerged most rapidly in the period after the UK’s lockdown began, rather unsurprisingly, among the technologies that are the most flexible to being repurposed. 3D printers were turned to the task of making protective equipment. Drones were deployed – or at least tested – to scan for individuals with high temperatures. The perennial ‘also rans’ of Augmented Reality (AR) and Virtual Reality (VR) were promoted as a method for combating isolation. However, as the newly established ‘working-from-home’ class were coming to discover that their life had become a continuous string of virtual meetings, the benefits of VR did little to overcome the competing attentions of children and pets. The first few weeks of lockdown also confirmed the importance of organisational consistency with technology. A lockdown does not bring the opportunity to experiment with unfamiliar technologies.
And then predictably, with a full four weeks of lockdown recorded the fall in retail sales in April was 18% lower in comparison to the same time last year. Another record low in as many months. In contrast to March, only the alcohol sector kicked against the downward trend by enjoying a 2.3% increase in sales. Given the duties on alcohol sales this may be some tiny glimmer of hope for a government that borrowed an additional £62bn and is supporting a quarter of UK workers through furlough. Increased alcohol consumption also offers a practical explanation for UK based claims that we are collectively not sleeping long or well enough. Evidence also suggests that Britons are feeling tired or groggy when we are awake. Increased alcohol sales in the UK may help to explain why these claims seem to be in contrast with US-based studies including those from Fitbit that says its US customers are sleeping slightly longer and better.
High profile business failures
The last eight weeks have brought a series of high profile business failures. Oasis, Warehouse, Debenhams, Cath Kidston and Laura Ashley reveal how immediately vulnerable and fragile so many clothing and non-food retailers were to a physical shutdown. These and other brands have shown how many retailers are not moving quickly enough to offering a full e-commerce experience. The type of change being demanded is not simply about putting a shopping cart onto a website. Full e-commerce has enjoyed decades of evolution and consumers are increasingly familiar with the experience delivered as a result of this learning. These high profile casualties and their inability to respond successfully makes it clear that what is needed is not as simple as just creating a digital mirror of the physical experience.
The widespread inability to pivot in a way that will find consumer favour is then seen with a 50% drop in April clothing sales in comparison to March. What makes this worse is that March too was a poor month with a drop of 30% against February sales. With high street clothing stores closed these percentages point highlight a combination of decreased consumer interest and the lack of a full online offering. The combination of a poor online experience and reduced consumer interest is a real threat to the high street that will emerge from recovery. Shopping habits built up over years have now been broken – perhaps permanently for many. This rapid change brought by necessity also represents real opportunity for innovators who can reimagine the retail fashion experience online and offline – AR and VR also figure in at least some of these innovative re-imaginations.
For the online retailers, April saw them capture 30% of all sales. Although this gain was admittedly against a reduced overall volume. Their goal in future months will now be to retain and even increase this proportion as the more reluctant consumers are becoming increasingly comfortable with an online offering and are discovering new habits.
As academics, local communities and regional authorities all argue for a sustainable and greener recovery changing habits are a positive message to be read from the severity of the economic impact. The retail fuel sales figures are one pleasing indicator of what might be possible. April fuel sales saw a 62% reduction by volume against last year and a reduction of £43m worth of fuel sold in comparison to March. With current fuel prices that immediately translates into a significant reduction in emissions over the UK’s skies.
While the local food retailers are small in comparison to the large supermarkets there are no real signs that during lockdown consumers have changed their buying patterns in terms of where they buy only in how much they are buying. Both large and small food stores increased sales by £5m over the same time last year. The increase in total sales for the smaller retailers does point to at least some short-term success for local retailers. This can be seen with, for example, butchers who have responded positively to the crisis by offering delivery services, phone orders and other practices that would have been quite familiar on the 1960s high street. Although admittedly this escape back to an overly fanciful retail past is made possible because of 2020 technologies.
Positive innovations in retail are also emerging worldwide during the lockdown that may stay on the high street long after the recovery. Supermarkets are letting customers reserve a slot to do their physical shopping and local outdoors markets are redesigning their layouts to maintain social distance. While some innovations have emerged out of necessity others are bringing an enhanced or even new angle to the retail experience that can contribute to the wider recovery that will – and must – come in the sector.
The contrast of butchers offering home deliveries to supermarkets letting customers book a physical shopping slot provides confirmation of a truism regarding digital transformation. There is no one ‘right’ path to digital transformation. And the solutions that suit a national chain of supermarkets will almost certainly never be right for an independent retailer. Rather than imitate the actions of competitors in an effort to keep up, it is necessary to find the unique niche that suits individual capacity and capabilities as well as the organisation’s underlying mindset and philosophy. With a niche identified it is then a case of deploying technology that best enhances this clearly defined offering.
The contrast between local butchers and national supermarkets also highlights how the pandemic has encouraged a divergence of thinking and approach. Supermarkets are bringing more of the online retail experience back into their physical stores. The butchers (and other small independent retailers) are exploring new and more flexible ways of working and offering a service at any time.
As other sectors return to full economic activity, a similar set of digital transformation challenges will emerge elsewhere. Read more about these challenges and how to deal with them in our book Strategic Digital Transformation