UK Retail Briefing: Inc Impact of COVID-19 - April 2020
Analyst Comment: The Impact of COVID-19 on Shopping Behaviour 
 
In a little over a month COVID-19 has significantly shifted consumer behaviour. Mintel has been tracking the change in behaviour of consumers due to COVID-19 since the 28 February on a weekly basis, and in this section we highlight the key shifts in consumer behaviour impacting the retail sector. 

We explore what this means in terms of retail sales within the UK Retail Sales – Impact of COVID-19 section of this Report. 

Preparation for lockdown drove significant sales for the grocers 
One of the earliest signs of impact on the retail sector in the UK of COVID-19 was stockpiling behaviours. Ocado warned its customers of delays to orders as early as late February, and within our data we saw a small minority, one-in-ten, had stocked up on supplies even before the Government implanted first social distancing and then lockdown procedures. 

This initial bout of stockpiling was clearly driven by increased concern driven by both growing domestic cases and the situation in Europe, with the lockdown in Italy particularly sparking consumers to think about how similar measures in the UK would impact their ability to purchase goods. 

Stockpiling behaviours significantly jumped, from 10% of consumers to 32%, in our second wave of data which coincided with the Government’s decision to implement social distancing and close schools and non-essential businesses. This was as consumers switched from concern to preparation of having to spend significant time in-home, heighted at the time by widespread gaps on shelves in essential products such as toilet paper, bread and food-cupboard staples. 

Whilst availability has improved in the intervening weeks, the number ‘stocking-up’ within our data continued to climb. What is notable is that it is younger consumers in particular which were responsible for this climb. 

This hints that this is not about ‘stockpiling’ in the sense that we saw in the initial weeks of the outbreak but a necessary shift in behaviour among these groups. Younger shoppers are more frequent shoppers, more likely to eat out of the home and crucially more likely to live in urban areas. This means this group is unlikely to shop in a traditional once-a-week ‘big-shop’ way, and unlikely to have the space to store products in the same way older shoppers do, and therefore the data below represents them shifting toward this style of shopping. 

Longer-term, whilst we would expect younger shoppers to continue to be more frequent in-home and out-of-home food buyers, our latest data shows the number ‘stocking-up’ has fallen back, which hints that this was a temporary shift in behaviour rather than a lasting change. However a legacy of COVID-19 may be that we see some switch their behaviours longer term to bigger basket style shopping behaviours – which would give a boost to the channels which best serve, larger format stores and online. 

FIGURE 1: COVID-19 tracker: number ‘stocking up’ on groceries by age, Feb - Apr 2020 
 
“Have you or your family made any changes as a result of the COVID-19/coronavirus outbreak?”

Base: ^ 2,000 internet users aged 16+, ^^ 1,002 internet users aged 16+, ^^^ 1,000 internet users aged 16+
 
Source: Lightspeed/Mintel 

Even prior to lockdown consumers were avoiding stores
Whilst the official ruling that all non-essential stores were to close came on the 24 March, the reality is that heightened concern and guidance on social distancing meant many consumers were avoiding crowded places far before this. Indeed even before the UK officially called for social distancing nearly a quarter (22%) of consumers were avoiding crowded places. 

The closure of workplaces, where work cannot be reasonably done at home, combined with the closure of the vast majority of non-food stores means that footfall in shopping locations has hit an all-time low. We do not, at the time of writing, have the data for March but the BRC-ShopperTrak footfall monitor for March recorded an overall 44.7% drop in footfall, and an 83.2% drop since the lockdown was introduced. 

Footfall will of course be at record low levels until non-essential stores are once more allowed to open, but we should not expect it to return immediately to normal levels when we reach this point. Social distancing measures will likely be promoted long after stores can once again open, which means certain groups still remaining at home and consumers looking to limit contact with others whilst outside the home. Concern will be high and as the data shows even prior to Government advice consumers were trying to avoid crowded places, and this will not change following the lifting of restrictions. 

Stores then need to prepare for the ‘new-norm’ of physical store trading that COVID-19 will bring. The grocery sector has already had to adapt, with queuing and one-way systems and protection for staff and customers. These will be needed across the sector, particularly when doors first open again. 

Although measures will be needed, and some will still choose to stay away, there is no hiding the fact that once restrictions are lifted there is an opportunity for retail locations, particularly those ‘destination’ sites, to gain patronage if other destination businesses, such as cinemas and even the foodservice and pub and bar sector, are still required to remain closed. Many consumers may see retail destinations as places to have a ‘day-out’ and therefore it is imperative that stores properly prepare for this by implementing measures to keep staff and customers safe. DIY retailers are already doing so and are in the early stages of re-opening their stores.

FIGURE 2: COVID-19 tracker: number ‘stocking up’ on groceries by age, Feb-Apr 2020
 
“Have you or your family made any changes as a result of the COVID-19/coronavirus outbreak?”

“Thinking about your shopping habits since the start of the COVID-19/coronavirus outbreak, which of the following apply to you?”

Base: ^ 2,000 internet users aged 16+, ^^ 1,002 internet users aged 16+, ^^^ 1,000 internet users aged 16+
 
Source: Lightspeed/Mintel 

Significant demand has shifted to online, but this is causing a strain
In the grocery sector as stockpiling behaviours and concern regarding COVID-19 grew, we saw a significant growth in online demand. Such was the peak in demand that it forced Ocado to not accept new customers, and at points take down its site, and across the sector wait-time for delivery slots stretched to weeks rather than days. 

Retailers reacted by quickly adding capacity and staff, Tesco for example has hired 40,000 new staff members across online and stores and added an additional 40% capacity to its online operation, and whilst this has eased the situation services remain at high capacity and priority is being given to those shoppers most in need of delivered groceries. 

Growing online use is not simply being registered within the grocery sector of course, and it is notable that within our data the number doing more online shopping has doubled since non-essential stores have closed. Indeed what COVID-19 has done is starkly show the benefits of operating a well invested in online operation, with either those without online capability, such as Primark, having no resource to sell through during the crisis and those with less developed online capability reaching capacity quickly. 

Of course it is logical that demand would move to online without stores, but like the grocery sector this has meant online players logistics have been significantly stretched. Amazon is prioritising delivery of essential items, Next is only allowing a set volume through its warehouses and taking down its site once this is reached whilst Boots has stripped back its range to only essentials online. 

As more warehousing and delivery capacity comes back online this pressure will ease but until non-essential stores open once more demand will be heightened. Indeed even when stores reopen we expect there to be greater than usual online demand as consumers remain cautious about physical store based shopping. There then will be a continued benefit to those who excel in the online channel past the peak of the outbreak. 

FIGURE 3: COVID-19 tracker: number ‘stocking up’ on groceries by age, Feb – Apr 2020 
 
“Have you or your family made any changes as a result of the COVID-19/coronavirus outbreak?”

“Thinking about your shopping habits since the start of the COVID-19/coronavirus outbreak, which of the following apply to you?”

Base: ^ 2,000 internet users aged 16+, ^^ 1,002 internet users aged 16+, ^^^ 1,000 internet users aged 16+
 
Source: Lightspeed/Mintel 

Increased at home leisure brings opportunity in the short term 
The grocery sector is one of the few which has seen demand increase since the outbreak. Initially this was driven by stockpiling but now it is being driven by a significant reduction in out-of-home food spending being redeployed into in-home food spending. Within this more consumers are doing scratch cooking and home baking. With this brings opportunities for kitchenware and kitchen appliance sales, alongside greater demand for recipes and ‘how-to’ guides, which means that food kits and food boxes are in a great position to grow sales. Indeed Hello Fresh has already commented it is seeing exceptionally high demand. Other food retailers could likewise tap into this opportunity of livestreaming tutorials for home baking or new recipe ideas.

As consumers have been forced to settle in to spending more time at home, they have naturally looked to increase in-home leisure activities. This has seen a growth in spending on in-home entertainment, particularly more traditional categories such as board games and puzzles – something the BRC highlighted in their March retail sales updated. 

With gyms forced to close, individuals have had to look to replicate work outs in-home. This has led to a rise in instructors offering in-home workout classes, with the PE with Joe series hosted by Joe Wicks regularly seeing over 500k daily viewers. As one of the few sanctioned ‘out-of-home’ trips, exercise has also seen an uptick and combined this has helped to stabilise and drive sales in sporting goods and athleisure wear. A legacy of the current conditions may be an uptick in exercise routines which may mean such an uptick is sustained post-lockdown. 

Another behaviour which has grown and quickly become normal in the current climate, has been an increased in video calls and associated entertainment, such as quizzes. Whilst not directly related to retail this may have the legacy of consumers being far more comfortable with such technology which could drive the potential for a greater uptick of video-call customer service. Indeed with stores closed John Lewis has already launched a video-conference based styling service for customers, a good example of how retailers can tap into the ‘new-normal’ COVID-19 has brought. Dixons has likewise launched its ShopLive customer service video chat which enables customers to virtually connect with store staff, therefore helping to share product expertise and service.

FIGURE 4: COVID-19 tracker: changes in leisure activities, 2nd April – 9th April 2020
 
“When it comes to how you spend your leisure time, which of the following have you done as a result of the COVID-19/coronavirus outbreak?”

Base: 1,000 internet users aged 16+
 
Source: Lightspeed/Mintel 

Certain COVID-19 behaviours will have a legacy far beyond the current outbreak 
Naturally due to the nature of the COVID-19 outbreak we have seen consumers far more invested in their personal hygiene. Following Governmental advice we have seen a majority of consumers register that they are washing their hands more often and use hand sanitizer more often. This has driven sales in personal and household care, but this is unlikely to be simply a short term boost. We would expect the outbreak to engrain such behaviours in some consumers, with higher legacy sales and awareness of cleaning claims within such products. 

The knock on effect of this is that consumers are also more carefully considering things they come into contact. Cash is an obvious example in this regard and over half of consumers are now trying to avoid using it when possible. From a legacy point of view this may accelerate more retailers to move to card-only, a trend that of course was gaining momentum before COVID-19. 

The official Government advice, at the time of writing (14 May), is still that it is not required for the general public to wear face masks. However there is much debate online regarding this stance, and in Europe a number of countries, including Germany and Spain, have now made it compulsory to wear masks when shopping or on public transport. 

Some 15% of consumers are already wearing masks in the UK and this of course will only soar if regulations are changed. There will then be naturally an opportunity for retailers, particularly fashion, to tap into a demand for ‘stylish’ versions of facemasks. However doing so can cause a backlash, as Boohoo found out, particularly if on-going shortages in the NHS continue. The logical solution to this is add a charitable component to sales with a number of brands in the US, such as Reformation, matching orders of facemasks by customers with a donation to in-need organisations. 

FIGURE 5: COVID-19 tracker: changes in behaviour since the outbreak, Feb – Apr 2020
 
“Have you or your family made any changes as a result of the COVID-19/coronavirus outbreak?”

“Thinking about your shopping habits since the start of the COVID-19/coronavirus outbreak, which of the following apply to you?”

Base: ^ 2,000 internet users aged 16+, ^^ 1,002 internet users aged 16+, ^^^ 1,000 internet users aged 16+
 
Source: Lightspeed/Mintel 

COVID-19: Market context
This update on the impact that COVID-19 is having on the market was prepared on 14th May 2020. 

The first COVID-19 cases were confirmed in the UK at the end of January, with a small number of cases in February. The government focused on the ‘contain’ stage of its strategy, with the country continuing to operate much as normal. As the case level rose, the government ordered the closure of non-essential stores on 20th March. 

A wider lockdown requiring people to stay at home except for essential shopping, exercise and work ‘if absolutely necessary’ followed on 23rd March. Initially, a three-week timeframe was put on the measures, which was extended in mid-April for another three weeks. 

On 10th May 2020, the Prime Minister announced revised guidance, recommending that people who could not work from home should return to the workplace, and giving people more scope to spend time out of the home. He hoped the next step "at the earliest by 1 June" would be for some primary pupils to return to school in England, and that this stage would also involve reopening shops. Hospitality businesses and other public places are included on this roadmap, but would not be re-opening before 1 July.

Our economic assumptions are based on the illustrative scenario included in the Bank of England's Monetary Policy Report, released on 7th May 2020 (https://www.bankofengland.co.uk/-/media/boe/files/monetary-policy-report/2020/may/monetary-policy-report-may-2020.pdf ). The scenario suggests that UK GDP could fall by 14% in 2020, recovering by 15% in 2021, and that unemployment will reach 8% by the end of the year, easing slightly to 7% by the end of 2021. The current uncertainty means that there is wide variation on the range of forecasts, however, and the numbers presented in the BoE's illustrative scenario are at the more pessimistic end of the spectrum.