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The Consumer Impact of Coronavirus

Friday 6 March 2020 Retail Consultancy

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Hannah Smith's picture
By Hannah Smith

Introduction

On March the 3rd the UK government started to move from containing Coronavirus to delaying the inevitable, and we are preparing for a widespread outbreak across the UK. We have already seen people wearing masks in public spaces, the panic buying of hand sanitizer, and cancelled flights and sports matches, however this merely marks the beginning of how this virus is likely to impact global markets, consumer behaviour and global supply chains. Alongside the headlines there is a human aspect, we are all consumers and whether we like it or not our behaviours are all set to change. Here we outline some of the impacts we can expect to see.

 

Consumer

CACI sees two key likely scenarios from the point of view of consumers:

  1. The natural progression of the outbreak leads to the inevitable point where the government’s advice shifts from business as usual and to ‘self-isolate yourself if you feel unwell’ to encouraging the public to stay away from public places and to avoid large gatherings. This will lead to a significant drop footfall within city centres and regional malls.
  2. Panic causes a drop in visitation to public spaces before any changes in the government’s advice, similar to what we already see following large terrorist attacks. This scenario is more of a concern, as the impact is likely to be more significant, and could last much longer than the first scenario. There are some signs that this is already underway.

 

Places

For big destinations, either scenario will have a negative impact in the short term, as footfall is likely to drop in towns, city centres and large destinations, if it is not doing so already. There is however a lifespan to these scenarios; the panic and mass hysteria will subside, and people will return to public spaces as Coronavirus falls away from the headlines of the news, meaning that footfall and visitation will bounce back in time.

Local destinations will feel less of an impact; the likes of retail parks and supermarkets will be less affected, possibly even busier, which already seems to be the case in China, albeit this market very different from that of the UK.

 

Impacts on corporate

From a corporate perspective, the high proportion of the workforce that will be taken ill at any one time will (and already has) impacted the speed of decision making, meaning that brands may be less reactive, and delays may occur in strategic decisions, for example progress on new developments and store openings.

 

 

Fashion

Of more immediate focus is the impact on supply chains; fast fashion is likely to be hit hardest, particularly for those brands relying on China as a part of the production line, which was already stretched during Chinese New Year. A key global fashion brand has already implemented a plan B, which involves shifting production to India and Turkey. Not all will have this option however, which will lead to low supplies on stock. We have already heard of issues from a major premium fashion client that their Fall/Winter collection has had to be moved back by 2 weeks due to a factory closure in China; they are considering merging collections if the situation gets any worse. In the premium and luxury sector, their reliance on the Chinese middle class as a major consumer group will be highly problematic, and we are already seeing a shortfall in sales.

 

Leasing

We also expect the leisure and catering sectors to be hit hard; the new James Bond film has already been delayed by 7 months due to concerns over a lack of visitation to cinemas over the next few months. Restaurants are also likely to witness a decline in visitors, whilst conversely delivery services such as Deliveroo and JustEat are likely to witness growth in demand. In the immediate future, it is also likely that online shopping will see a spike as consumers are hesitant to visit shopping destinations.

 

Local independents

On the flip side, this could mean good news for local, independent shops who are not a part of the global supply chain and are not dependent on high destination footfall. In the same manner, the second-hand market could also benefit from the global supply issues of fast fashion and the sort, with more consumers using charity shops or making second hand purchases on the likes of Ebay and Depop.

 

A challenge too far?

Those that have already experienced a difficult winter trading period, and have already blamed the weather and the floods for poor performance will feel the impact of this change in behaviour hardest. What we are likely to see is that brands that were on the cusp of CVAs are likely to be pushed over the edge, with FlyBe having already announced that it is going into administration this week. Landlords are more robust as most rent agreements are already committed, however the decline in footfall will mean that retailers are likely to demand reductions.

 

Conclusion

Retail is the largest employment sector in the UK, and was already in upheaval, and this will further challenge everyone more so than ever. There is a need for brands and landlords work together to mitigate the impact of Coronavirus on the industry.

There are windows of opportunity for smaller businesses to benefit from the halting of the global supply chain; if smaller and larger brands work together in this context the impact can be mutually beneficial. An example of this is the ‘Brands at Topshop’ concept in the Oxford Street store; independent designers are showcased within the store.

This could be a solution to plugging the gap in supply, whilst also offering a leg up for less established brands. Similarly, cosmetic steps such as hand sanitizer, the availability of contactless payments and showing consumers you care will be key. In short, there is a need for both landlords and brands to adapt quickly to whether the imminent storm that will be caused by Coronavirus.

On March the 3rd the UK government started to move from containing Coronavirus to delaying the inevitable, and we are preparing for a widespread outbreak across the UK. We have already seen people wearing masks in public spaces, the panic buying of hand sanitizer, and cancelled flights and sports matches, however this merely marks the beginning of how this virus is likely to impact global markets, consumer behaviour and global supply chains.

The Consumer Impact of Coronavirus