Amid a global crisis, it doesn’t take long for people’s daily habits to change, none more so than the way we are spending our money. In the last few months, consumer spending has dropped sharply in some areas, compared to the same time last year. Barclaycard released data in May showing how their customers have changed spending habits, with overall consumer spending declining by 36.5%year-on-year in April. Barclaycard accounts for nearly half of all UK credit and debit card transactions which equates to hundreds of millions of customer transactions, noting that non-essential spend fell by 47.7% and essential items declined by 7.5%.
With consumer spending down overall due to continued lockdown restrictions in the last few months, here at Wizzcashwe ask what does the future hold for retailers and will implementing social distancing methods, with lockdown beginning to ease, help?
How Different Sectors Are Coping
Whilst non-essential spend on things such astravel, including public transport, (down by 86.8% year-on-year) and in bars, pubs, and clubs (down by 96.9%), there has been growth in others. Barclaycard found that food and drink specialist stores, such as off-licences, greengrocers, butchers, bakeries etc, saw 37.7% growth year-on-year in April. DIY and home improvement purchases also grew by 26.5% as well as online spend for eating and drinking improving by 24.6%.As the data shows, there are winners and losers with consumer spending habits. If people cannot buy food and drink in restaurants and pubs, they will purchase it from supermarkets and off-licences instead. One industry’s loss is another one’s gain, and the longer lockdown restrictions are in place, the longer some sectors will feel the effects.
In the retail sector, many shops are reportedly cutting prices due to the drop in sales numbers. Prices in May fell by 2.4%, the fastest rate since 2006according to data from Nielsen and the British Retail Consortium (BRC), after dropping by 1.7% in April. The areas that saw the sharpest drops were in both clothing and furniture. With unsold stock mounting due to store closures in place since mid-March, retailers are having to look at ways to attract customers again, with cutting prices one method. The good news is that with lockdown measures being eased and many shops allowed to open again from 15 June, that the strain will begin to subside. However, it’s too early to tell if this will begin to even out again to pre-lockdown conditions as not all retail stores will re-open from mid-June. It’s reported that high-street names such as Topshop and Clarks will remain shut, whilst other household names, including Laura Ashley, Debenhams, and Cath Kidston, have already succumbed to closures with some falling into administration.
Continuing Social Distancing Measures
For the shops and stores that are planning to re-open in mid-June, one of the biggest challenges will be how they implement social distancing for customers and staff. Whilst they welcome being able to open again, the footfall is not expected to return to previous levels before COVID-19 due to the 2-metre rule that must be in place between people. Chief Executive of the BRC, Helen Dickinson, has said: “Many retailers will have to fight to survive, especially with the added costs of social distancing measures.” Encouraging customers back into retail stores by cutting prices is one thing but convincing them that their stores and shops are a safer environment than before is another. The ongoing uncertainty with stores implementing social distancing and how the retail landscape will look once customers start to revisit is echoed by the Bank of England (BoE), with the UK economy set to shrink by 14% this year.“In large part, that reflects the impact of both enforced and voluntary social distancing, with some additional drag from lower incomes and confidence about the outlook,” the BoE said in a statement in May. In April 2020, household spending dropped by more than 40%according to data from research carried out by the London Business School. It found that the average weekly expenditure including recurring bills fell by 41.2% compared with April 2019, with spending on services falling 44% and restaurants down by 30%.
So how are shops, restaurants, stores etc. going to impose social distancing measures when they re-open?One company that has been significantly affected during the pandemic has been Primark, with its business model primarily reliant on their retail stores rather than e-commerce. This saw the company go from sales of £650 million per month in the US and UK to zero . Primark is re-opening all 153 of their UK stores from 15 June with hygiene measures in place that are currently being used in their Netherlands and Germany stores that reopened in May 2020. In a company statement, the clothing giant confirmed they will be using “social distancing protocols, hand sanitiser stations, Perspex screens at tills and additional cleaning of high-frequency touchpoints in the store,” as well as PPE for all employees.
Whilst for larger retail stores implementing social distancing measures may be easier, smaller retailers face a challenge doing so.Systems like an automated traffic light system that is being implemented in some Aldi stores, limiting the number of shoppers allowed in at a time, may struggle to work in smaller retailers. The former Ikea digital transformation director Michael Valdsgaard stated, “Strategies that work for supermarkets won’t work everywhere; stores may soon be able to reopen, but don’t expect customers to be waiting at the door.”
The E-Commerce Rise
Another obstacle that traditional retail stores will continue to face going into the future is that of the rise in e-commerce since lockdown measures came into place. With many consumers now shopping online instead, will they be tempted to go back into retail stores when they re-open if they can buy online and have the item delivered? Whilst this is not a new battle for the high-street, adding public health concerns into the mix has changed things drastically. 42% of consumers stated they will shop online moreeven after shops reopen on 15 June, according to research from Dynata and e-commerce platform ChannelAdvisor. This included purchasing of luxury items as well as essential items with as many as 25% shopping from retailers they had not done before.
Consumer trust levels need to be rebuilt going into a post-pandemic world if consumer spending is set to increase. The hope for many retailers is from mid-June, the start of this will slowly begin, but it remains to be seen how shoppers react to social distancing measures in shops and whether e-commerce transactions will continue to be preferable.
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