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So is this it… has the new normal arrived?

Friday 16 October 2020 Data Insight & Analytics

Sue MacLure's picture
By Sue MacLure

On March 23rd 2020 we all went home, battened down the hatches, cuddled up to our toilet rolls and settled in for the long haul. We can do this, we won’t let a little invisible gremlin beat us, we will come together, we will support each other, we will prevail.

Then bit by bit, things eased, we went back to the pub, worked out in the gym, swam in the pool, enjoyed a staycation, visited the office once in a while, braved the shops, sent our kids back to school, and fully embraced our newest fashion accessory – the face mask.

And here we are now wondering if we’re going right back to where we started back in March, coupled with the added complication of Brexit, recession, and how 6 months of lockdown have totally changed our behaviours.

How does any business, whatever their political leanings or views on the guidance over the last 6 months, plan their strategy for the coming year? How can they possibly use their wealth of experience to instruct their future approach, what data can they look at?

At CACI we have for many years been supporting owners of space – the landlords and investors and the occupiers of space – the retailers, leisure operators and offices, in understanding the value of a site. Whether that be in retail sales or rental revenues, knowing how much money is likely to flow in and out of an area, and from where, is our thing.

To do that, we have used previous performance as a start point, and layered in seasonality, big behavioural shifts, e.g. online behaviour, previous recessions etc and alongside government economic predictions been able to do a pretty good job of getting a clear view of where the money is, by retail sector and location.

So how are we handling the Covid effect?

In a nutshell we’re being incredibly pragmatic about it. It’s not over yet and we can’t know what the future holds, but we can, and like to think have, made some sensible calls.

For the last 4 months we have been taking our base levels and factoring in the monthly Retail Spend Index to calibrate spend across categories every month. For example, even as a consumer you could intuit that clothing sales are down and DIY spend is up, but we’ve made sure we’re applying the quantifiable movement in those product categories, and many others, on a regular basis over and above the expected base line, on and offline, and will continue to do so. These predictions then feed into a scenario building tool that allows clients to see how their business may be affected.

That was our initial reaction to a shock situation and our predictions have turned out to be accurate so far. However, it’s fair to say that now we need a longer-term approach to determining those spend levels – in the near and longer term. We have had to make some calls about which new habits that we’ve formed will stay and which will settle back down to something close to pre-Covid behaviours.

To do that we continue the flexible approach to track the ever-changing spending landscape but are adding in some new normal factors.

  • Firstly – our base line economic forecast – we’re reviewing that from multiple sources, some more optimistic than others, and given ourselves the ability to apply a best / worst scenario for the coming years.
  • Secondly – we have amended our tourist spend behaviours, much of a retail catchment area’s value does not come from the residents, and movement in the UK has changed dramatically with the growth of the staycation and the virtual decimation of the foreign traveller. This hits different categories in different ways and we have allowed for that variance in our calibration figures.
  • Thirdly – we have tracked the movement of individuals to better understand the worker spend behaviours. It will not be a surprise, indeed it has been much reported on national news, that city centres have suffered whereas the local communities and smaller centres, towns and high streets are seeing a resurgence. We are all loving local. We have factored that in by the 15 different types of retail centre (e.g. transport hub, shopping centre, high street etc etc) and calibrated our spend levels accordingly.
  • And finally – we have factored in the on and offline shopping split and identified a likely ‘retention’ level for each of those channels moving forward.  i.e. Many of us can’t wait to get back into stores and browse without worry (without our masks!), others are fully embracing online deliveries. These are factors we keep an eye on with the monthly spend, as well as defining a realistic level for longer term forecasting.

These are measures we can, and are, applying now to support your planning in the next 6 months and beyond, but we recognise that in times as uncertain as these we need to be able to react to events fast. So we have moved to an increased frequency of updates. That’s our new normal – a solid methodology spine with the ability to apply nuance and flex to reflect the world view at that time - and we’re confident we can do that.

 

How does any business, whatever their political leanings or views on the guidance over the last 6 months, plan their strategy for the coming year? How can they possibly use their wealth of experience to instruct their future approach, what data can they look at?

So is this it… has the new normal arrived?