The Challenges of Non-Essential Retail: What’s Next?
By Sarina Kiayani, Graduate Trainee
COVID-19 has undoubtedly posed a significant challenge to the retail sector. With lockdown forcing the closure of several non-essential businesses, the business survival came down to three factors: their e-commerce operations, support from consumers and the state of their finances pre-lockdown. With the COVID-19 pandemic heightening the growth of e-commerce, along with continued uncertainty over the future of the UK’s relationship with the European Union, clear winners in retail will depend on who’s willing to adapt – and fast.
15th June: Now What?
After a tumultuous three months, non-essential retail is due to make a return to our high streets on 15th June. Yet this won’t come without adversities. BDO’s monthly High Street Sales Tracker found total like-for-like sales declined by 18.3% in May and 29.6% in April. Although much of this can be attributed to forced store closures, to significantly increase sales will remain difficult. In their analysis of the figures, BDO noted that reduced footfall and staffing concerns will be amongst issues faced when non-essential retail opens on 15th June. Retail businesses therefore must ensure that they are adapting to these new COVID secure measures whilst also ensuring minimal impact on their service delivery.
The Rise of e-commerce: Adapt or Fail
The rise in online shopping has posed a challenge to businesses with a sole high street presence for the last decade but became the key to survival during lockdown. A business model relying solely on footfall and no online presence would give no sales during times of high street closures. A website should no longer be considered a choice for retailers, but a necessity to ensure their survival – particularly amidst concerns that social distancing will reduce footfall. It also reassures consumers that their favourite businesses will always be there for them, whatever the circumstances.
The UK has one of the most advanced e-commerce markets in the world, which has continued to grow with the closure of high streets in lockdown. Retail experts at KPMG highlighted the impact of COVID-19 on e-commerce, noting that online retailing could reach 50% of the UK retail total by 2025. As this was previously predicted to happen in 2030, the impact of COVID-19 on e-commerce will be profound, and the old high street business model will have to adapt to survive.
First COVID, Now Brexit
Even if retail businesses survive COVID-19, they will come out of the frying pan and into the fire, with the final Brexit deadline on 31st December 2020.
Trade negotiations remain deadlocked, with both negotiating teams standing firm on polarised demands. Given the Government’s reluctance to extend the Withdrawal Agreement’s transition period, if the animosity in trade talks continues, the UK could crash out of the EU and cause catastrophic repercussions for the retail sector, in which several businesses rely on both the exchange of trade and labour with the EU and close regulatory alignment. Now is the time for retail businesses to communicate their policy asks around Brexit, to ensure that the sector achieves the best Brexit deal possible.
So, What’s Next for Non-Essential Retail?
With fears of further ‘spikes’ of COVID-19 in the next few months, it’s become apparent that retail businesses can no longer rely on a high street presence to survive. E-commerce has proven a lifeline for several retail businesses in the lockdown period and retailers’ e-commerce presence needs to be placed high on their agendas to survive any future shocks to bricks and mortar retailing.
And even if COVID-19 disseminates, retail businesses are not yet out of the woods with the looming end of the Withdrawal Agreement’s transition period. Without effective Government engagement to make their case for a trade deal benefitting the sector, businesses may regret sitting tight on December 31st.
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