Circle Opinion

The impact of CV-19 on retail

Hannah Smith

The last 10 days have seen unprecedented change and disruption to the UK as we know it, with schools now set to close on Friday, and most of the UK’s workforce immobilised or working from home. We have seen footfall drop by up to -60% in the last week, and it is expected that centres and operators will close this weekend if they haven’t done so already. The widespread disruption has had notable impact on customer behaviour, and we are now seeing the first CVAs and indefinite store closures. We believe there is a deeper story to the headlines, one which looks at understanding the store, centre, town and region level of how communities are being impacted. Here we outline what the nation thinks about the future of retail as a result of CV-19.

How Have Customers Reacted?

Unsurprisingly, awareness of the pandemic is universal, and has impacted consumer’s retail behaviour, with 86% reporting that they have made some change to their retail (non-grocery) shopping habits as a result of CV-19. Behaviour shifts are not equal across the UK with Londoners and Northern Irish far more likely to have already made this shift, as are particularly young and older shopper groups. This is likely a function of the more rapid reaction of Ireland and the greater penetration of CV-19 into London. Regions less likely to have changed their behaviour are the East Midlands, East of England and the North East, which house a high proportion of middle-England.

What Can We Expect Next?

The coming weeks will see a significant escalation in the number of cases and likely further restrictions of movement. Across the UK 50% of consumers are planning on further reducing their in-store spend. The groups most anticipating changing their behaviours are among the core shopping groups for many brands and centres. 39% are anticipating to shifting their online retail spend (this excludes grocery) in the period, but of these 85% are expecting to return to their previous patterns of behaviour. Whilst the consumer intention to revert to previous patterns in positive, it must be remembered that we will emerge from the crisis with a unique situation where everyone’s market share is near zero and all operators are targeting all customers.
This is an unprecedented opportunity to target previously very challenging markets as all shoppers are up for grabs; landing the right message to the right audience at the right time in a likely very crowded space is key.

Impact On Place

Recent years have seen a growing trend towards localisation, with a rise in authenticity and valuing community. The lasting legacy of CV-19 may well be a rapid acceleration of this trend. Destination centres will see a fall not just on domestic footfall but also a notable impact from tourism, both international and domestic, and will need strong communication with customers to recover once the situation has normalised. In some areas rising community spirit is clear, with local shops running door delivery, and community groups supporting outreach programs to those who are isolated, actions that are driven using social media channels. Ironically it is this wide engagement with digital that is facilitating a return to traditional values.

Impact On Operations

With falling footfall, stockpiling, closures of brands and shifts in people’s patterns of movement the impact on how retailers and centres operate on the ground will be significant. Looking beyond management of supply chains and stock control to the customer experience we can see notable shifts – for example many shops will be moving to contactless transactions and dedicated shopping times. It is key that brands adapt quickly to growing demands of operations such as home delivery services.

Impact On Leasing & Occupiers

The latest guidance from the Treasury suggests that the imminent threat of administration for solvent, profitable chains (such as Mountain Warehouse) this week have lifted, nonetheless many occupiers will be looking for rental holidays. Grocery, convenience, household operators and pure-online players are experiencing stock-piling and strains on supply chain – due to unprecedented levels of demand. Conversely, destination, luxury operators, casual dining and the leisure sector will be hit especially hard.

To succeed in this environment, operators must be nimble and empower local stores to do what is right e.g. home delivery, different opening hours, local ranging and be open-minded to change. This could represent an opportunity to fast-track existing trends such as connecting digital and physical channels – innovative brands should capitalise on it.

Impact on Marketing

In the current climate the role of marketing changes, it is not possible to persuade customers to still come to a centre, and nor should you. Focus needs to shift to how you better connect to those that have been retained; this will come through understanding who they are, what they need and how to meet their needs. This is possible using app data which is available to within 24hrs. It is key to both a) mitigate and reward those who are still coming; these are your core and loyal customers and will be key to future success and b) identify your target customer, where they live and how to re-engage them. Doing this presents a significant opportunity as market shares will be reset at 0% during the relaunch of these channels.

Coming Out The Other Side

The evidence suggests that most people are anticipating a return to typical behaviours. There is however an indication that younger shoppers are anticipating a surge in spend and are also expecting a permanent shift in behaviour (likely more online). While most think they will return to ‘normalcy’ the reality is entrenched behavioural patterns have been broken and the opportunity exists for centres and brands to redefine catchments and where people go to shop.

This is both an opportunity and a risk greater than anything ever experienced previously. Understanding how, and who has fallen away, and where opportunity to gain market share, will be crucial to maximising the return.

Conclusion: What Does This Mean For Insight?

More so than ever understanding the ‘so what’ and informed decision making is key. Matching the right tool to the job should be the focus. Pre-summer exit survey programs should be suspended unless there is explicit need. Short term focus on who is still coming and how to service them will mitigate short-term impacts. This is best done using mobile app data in tandem with Acorn and understanding why. Attention should then turn to gaining market share as restrictions on movement lift. It will be a level playing field so undertaking market gap analysis to see where the opportunity was pre-crisis is important, but so is speaking to your customers now to understand their sentiment. CACI online surveys allow you to listen to your customer in the crisis and position yourself to react accordingly. As retailers seek rental relief the opportunity exists to secure longer term commitment with innovative rent deals that value the online halo, and in any fast-moving bear market investors will be seeking opportunity. Decisions taken now must be informed with intelligent data and insight.

For a better understanding of how the changing behaviours of people in and out of your locations and stores might affect your business, please get in touch.

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Hannah Smith