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The Impact of COVID-19 on Retail and Ecommerce - UK - June 2020

OVERVIEW 
What you need to know
Key issues covered in this Report
Products covered in this Report
WHAT COVID-19 MEANS FOR UK RETAIL 
Short, medium and long-term impact on the industry
Figure 1: Short, medium and long-term impact on the industry
Short-term
Medium-term
Long-term
Opportunities and Threats
Short term channel shift has significant legacy impact
COVID-19 recession will polarize finances, hitting the mid-market
Sourcing and lead times to be placed under greater scrutiny
Necessary changes at store level will leave a much changed sector
Impact on the market
Record decline for the retail sector in 2020
Figure 2: All retail sales, non-seasonally adjusted including VAT, market size and forecast, 2014-2024
Impact on key consumer segments and shifts in behaviour
Retailers with a younger shopper base may be hit harder
Greater engagement in the online channel from older generations
A focus on local communities will extend far past the lockdown
The staggered return of footfall
Figure 3: Primark Cambridge, 15 June 2020
How a COVID-19 recession will reshape the market
The COVID-19 recession will be a step too far for many retailers…
… and for many landlords
Value-for-money will become even more important
Trust in pricing must be re-established
COVID-19: UK context
THE IMPACT OF COVID-19 ON CONSUMERS
Anxiety levels align with case curve...
Figure 4: Mintel COVID-19 exposure anxiety index, 28 February – 3 June 2020
… but consumers remain anxious about their health
Figure 5: People’s level of concerns about the risk of being exposed to the coronavirus, 28 February – 3 June 2020
COVID-19 concerns by demographics
Figure 6: Proportion of consumers showing the highest degree of concern (4 or 5 out of 5) regarding the risk of being exposed to the coronavirus, by age, 28 February – 3 June 2020
UK begins to soften lockdown measures
Figure 7: Government COVID-19 lockdown exit strategy, published 11 May 2020
Lockdown fears moderate
Figure 8: People’s level of concerns about how the outbreak might affect their lifestyle, 28 February - 3 June
A bleak outlook for the economy
Figure 9: Consumer views on the impact of the COVID-19 outbreak on the UK economy and their own finances, 28 May – 3 June 2020
Consumers cut back outgoings, and add to savings
Figure 10: How consumers have been affected or changed their behaviour as a result of the outbreak, 21-28 May 2020
Household finances hold steady for most
Figure 11: Changes in financial situation since the start of the COVID-19 outbreak, 21-28 May 2020
COVID-19 is yet to meaningfully affect most households’ well-being…
Figure 12: The financial well-being index, January 2015-May 2020
…but confidence for the year ahead plummets
Figure 13: Consumers’ financial confidence for the coming year, May 2020
Middle age groups feel particularly vulnerable…
…COVID-19 support package key for self employed
THE IMPACT OF COVID-19 ON RETAIL SALES 
Spending activity has dropped dramatically
Figure 14: COVID-19 tracker: intentions to spend in the next month, 28 March -3 June 2020
Store closures and lower footfall means a historic decline in 2020 sales…
Figure 15: All retail sales, non-seasonally adjusted including VAT, market size and forecast, 2014-2024
…but headline figures mask huge differences between key categories
Figure 16: The estimated impact of COVID-19 on all retail sales, 2019-21
Impact on grocery sales
Figure 17: All food retail sales, non-seasonally adjusted including VAT, market size and forecast, 2014-2024
The impact of COVID-19 on non-foods will be significant
Figure 18: All Non-food retail sales, non-seasonally adjusted including VAT, market size and forecast, 2014-2024
Specialist fashion sector to be significantly hit
Figure 19: Estimated annual retail sales growth, by specialist category, 2020
THE IMPACT OF COVID-19 ON ONLINE RETAILING 
Significant demand has shifted to online, but this is causing strain
Figure 20: COVID-19 tracker: online use, 23 April – 3 June 2020
Online will have a record 2020
Figure 21: All online retail sales (inc. VAT), market size and forecast, 2014-2024
Online will account for around a quarter of sales in 2020
Figure 22: Online share of all retail sales (ex-fuel), 2014-2024
Store-based players regain share, due to the grocers
Figure 23: Share of all online retail sales, by type of retail operation, 2010-20
Social platform shopping will see a legacy boost
Figure 24: COVID-19 Start-up: Send a Negroni, June 2020
THE IMPACT OF COVID-19 ON THE GROCERY SECTOR 
COVID-19 drives peak in in-home food and drink expenditure
Figure 25: All grocery retail sales (ex. fuel, inc. VAT), market size and forecast, 2014-2024
A hunt for value could undermine specialists’ sales
Figure 26: Forecast % change in sales for the main components of grocery retail sales, 2020
The cost of trading during COVID-19
The longer-term legacy of stockpiling
Figure 27: The effects of stockpiling, March 13 2020
A repeat of the post-financial crisis emphasis on self-reliance
Figure 28: Robert Dyas, the veg trug, April 2020
Longer-period for in-home F&D brings opportunity for meal solutions
Figure 29: Tesco meal solutions, June 2020
Online finds its second wind of growth
Figure 30: Ocado response to increased demand, March 2020
Figure 31: Cross-town collective, March 2020
A focus on the community brings opportunity, and potentially critique, for the grocery sector
Figure 32: Shifts in priority due to COVID-19, 7 May – 14 May 2020
THE IMPACT OF COVID-19 ON THE FASHION SECTOR 
Likely to be the hardest hit retail category by COVID-19 in 2020
Figure 33: All fashion specialist retail sales, market size and forecast, 2014-2024
The long-term view
Fashion hit harder by social distancing than by store closures
Figure 34: Reasons for buying new clothes, August 2019
Some opportunity in ‘at-home’ and leisure wear
Figure 35: Little Mistress NHS Kindred Rainbow thank you NHS face mask, May 2020
Online demand ticks-up but specialists struggled to cope with demand
Figure 36: Next homepage on reopening, April 2020
Technology playing a greater role in the shopping experience
Integration of tech solutions will pay off for multichannel shoppers
Figure 37: John Lewis Personal styling service, April 2020
THE IMPACT OF COVID-19 ON HOME RETAIL  
COVID-19 will have significant legacy impact on home retail specialists
Figure 38: Breakdown of household goods stores retail sales, 2019
Figure 39: All home specialist retail sales (inc. VAT), market size and forecast, 2014-24
Greater online penetration brings new store opportunities for furniture retailers…
Figure 40: John Lewis AR sofa view, March 2020
Figure 41: Ikea Planning Studio Tottenham Court Road, November 2019
…but also poses the question of store function
Figure 42: Currys PC World Shop Live, April 2020
Repairs, services and second hand stand to benefit from recessionary behaviours
Figure 43: Ikea Spain, ‘save our furniture’, May 2020
Shift in working habits brings opportunity for household specialists
Figure 44: Ministry of Makers, collapsible furniture, May 2020
THE ‘NEXT NORMAL’ OF IN-STORE SHOPPING 
There is demand for in-store shopping to resume
Figure 45: What consumers are looking forward to when social distancing measures are eased, 7-14 May 2020
However we know footfall will still be significantly impacted
Figure 46: Time spent in store, 16 April- 3 June 2020
Location will be crucial
Figure 47: Changes in local shopping, 16 April-3 June 2020
Key to ensuring impact on footfall is limited is reassuring consumers
Figure 48: Aldi – automated ‘traffic light’ store entrance, May 2020
Hygiene a crucial concern
Figure 49: Co-op face covering sign, May 2020
Figure 50: COVID-19 behaviours when shopping for groceries, 28 May – 3 June 2020
A further push toward a ‘cashless’ future
Figure 51: Attitudes towards cash use, 16 April – 3 June 2020
WHAT WE CAN LEARN FROM PREVIOUS SLOWDOWNS 
High-ticket and discretionary purchases suffered in the last recession
Figure 52: All retail sales (ex-fuel, Ex VAT), by broad category, 2008-2014
Non-food discounters were among the big winners in the last recession…
Figure 53: Compound annual growth rate in non-food retail sectors, 2008-2014
…as was fast fashion
Recessions can accelerate structural change
Financial crisis was too much for some, and the same will be true again
Even the survivors will be reshaped by the coming recession
Yet more turmoil for physical retail space…
…and the prime candidates to fill empty retail space are facing their own challenges
LESSONS FROM OTHER REGIONS
In China, the first country to exit lockdown, footfall has slowly returned
In Germany a similar trend is apparent
Figure 54: Google COVID-19 Community Mobility Reports, Germany (national) 15 February – 7 June 2020
Recovery in footfall much slower in Italy
Figure 55: Google COVID-19 Community Mobility Reports, Italy (National) 15 February – 7 June 2020
What this means for the UK
APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Data sources
Market size
Figure 56: Major retail categories, broken down by SIC code, 2020
Abbreviations

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