What will the High Street look like post COVID-19?

The UK High Street was under considerable pressure even before the COVID-19 pandemic arrived. With it, it brought store closures across the board with no forecast of a return to ‘normality’. Combined with a tough period post-Christmas, many long-established names such as Oasis, Warehouse and Debenhams, have faltered. In recent weeks, even mobile phone stores such as Carphone Warehouse – which have historically proven to be more resilient than traditional retail stores - have exited their standalone stores. What does this mean for the High Street in 2021 and beyond?

Not only has the market changed overnight, but the introduction of ‘lockdown’ periods by Governments around the world are also forcing consumers to change their shopping habits, potentially for the long term… Those consumer groups who have spent their lives shopping on the High Street are being forced to shop online, and are adapting accordingly; getting used to e-commerce websites and no contact, socially distanced deliveries to their doors.

Whilst the High Street is effectively shut down, consumers are continuing to spend in the few stores they can access physically, such as supermarkets, and beyond that they are spending online. Whilst this continued spend supports retailers by driving turnover, with the absence of physical stores to offer click and collect services, retailers are dependent on the most margin eroding option of home delivery. It can also not be overlooked that Amazon continues to be a preferred option for many customers; their stock price growth from their pre pandemic high reflects the volumes they are processing coupled with their selection as the preferred antibody test distribution partner in the UK.

• More customers than ever are becoming comfortable and competent with online ordering and delivery
• If retailers can deliver online, then it is likely to be costing them significantly more to fulfil the purchase than in store. Recent research by BearingPoint established that online fulfilment costs are typically ca. 4 x higher than store fulfilment
• Footfall driving competitors are ceasing to trade e.g. department stores
• Pureplay retailers are going from strength to strength due to lockdown
• More CPG manufacturers are setting up their own fulfilment operations to deliver directly to the end customer – the so-called disintermediation of Retail

An additional new pressure has been the entrepreneurial spirit of small retailers - especially in food and drink. The country is full of breweries, distilleries and artisan food producers who have been able to move swiftly to launch online fulfilment. Often only requiring a phone and a van they have been able to continue business as usual and potentially even expand their brand into new markets and regions.

For retailers without a credible online fulfilment option, they risk being caught in the middle behind sophisticated operators and emerging threats.

The growth in online face to face communication via Facetime, WhatsApp, Zoom and others can also be considered a new challenge. Families and friends are interacting like never before via these digital platforms – including those who have never before considered such interaction – and it may become a preferred mode of communication; what is better than handpicking the people you socialise with rather than taking a chance when you leave the house?! The impact on coffee shops and pubs is as yet unknown, but this must be considered a potential threat to future trade, and by default to more traditional high street footfall.

How soon will this happen?

The greatest opportunity for the High Street is that online fulfilment is incapable of serving much of the market, forcing people back to the High Street when they are allowed. Within grocery retailers, the discounters have taken market share of 13.9%[1] without either of them offering home delivery. Their typical urban locations could also be valuable for driving much needed footfall into High Street locations.

The greatest limiting factor for home delivery domination remains the cost premium over traditional shopping. Unless there is a significant price correction fueling inflation, online sales will continue to generate losses for a large number on retailers. This creates a window of opportunity for traditional retailers to regenerate their instore offer and use the shutdown time to focus on their future strategy.

Who could be the winners when we return to normal?

• Retailers who can repurpose their stores to become local fulfillment hubs for their products, and even for their competitors. Sweating the asset of expensive leases and sunk staff costs to fulfil orders and drive footfall could make the difference between survival and failure.
• Value adding retailers who offer a seamless digital and instore customer journey. Online fitting rooms are becoming reality but why not add a physical fitting room at the collection point to ease the return process for the customer and get more pristine stock back into the supply chain to sell at full price?
• Retailers who are able to take customer personalisation to the next level – obviously within information security parameters – how can the elderly or key workers be allowed to access more of the services they require e.g. home delivery without needing to be at the front of the queue

Summary

Whenever the UK High Street reopens it will be a challenging time for all retailers. Consumer behaviour has been forced to change, and this will undoubtedly force older customers to embrace new technology. As we start to see a phased reduction in lockdown controls this could result in stores being open but without a large proportion of normal customers wanting or being able to return. The retail High Street has always been evolving but its response to the pandemic will be more crucial than ever if it is to survive in any recognisable form.