Published Monday 17th August 2020

The last few months have arguably been the most challenging for retailers in generations. The news has been awash with stories of struggling businesses and an economy in recession. However, there has been a quiet cause for optimism, or at least the avoidance of a worst-case scenario.

Following the easing of lockdown, various outlets have reported fast positive rebounds in the retail sector. While there are still concerns about the coronavirus’ impact on the economy as a whole, there is light at the end of the tunnel, which could be vital for companies.

The Early Recovery

When the lockdown was first announced in March, many economists stated that a recession would result, but it would be markedly different to that experienced in 2008 and 2009. The ‘V-shaped recovery’ was frequently cited, as analysts prepared for a sizeable bounce back when consumers were allowed to return.

Similar results to those expected have since emerged in June and July, as lockdown begins to be eased. The British Retail Consortium (BRC) and KPMG have announced that retail sales rose in July by 3.2% compared to last year. There was a similar increase for the June figures, while analysis from Barclaycard showed a similar recovery.

Products for the home, such as food, furniture and homeware, have all excelled over the last few months. The warm weather has also promoted spending, while previously closed outlets – salons, bars, restaurants – have also experienced growth.

Sustaining Consumer Demand

As with all analysis and forecasting at this moment, these latest figures come with an air of caution. While the overall picture is promising, there are sectors that haven’t experienced the bounce back, and even the successful retailers are making up for lost ground.

The signs of a spending recovery have been offset by the broader announcement of the UK economy entering a recession. GDP growth in May (1.8%) and June (8.7%) wasn’t enough to offset the record-breaking downturns experienced during the lock down, with a 20.4% decline reported for the three months from April.

The recent growth figures evidence the belief that, unlike the financial crisis of 2008, consumer confidence remains at a reasonable level for now. However, many analysts have said the size of the recent growth is actually below what some analysts had hoped. Expectations of a V-shaped recovery have been widely replaced with W-shaped forecasts, predicting a drawn-out process with more declines.

One of the biggest concerns is a potential unemployment crisis in the autumn as the UK’s furlough scheme comes to an end. Retail analysts expect that the next few months will be an acid test for the UK’s recovery, as economic and employment pressures weigh on consumer’s willingness to spend.

Many luxury retailers, such as jewellers and non-fast fashion outlets, have struggled to experience the bounce back, which could be evidence of this fragile consumer confidence.

A New Retail Market

Another important note concerning these latest retail figures is the changes in how consumers spend. Beyond the growing and stagnant sectors, the shift to online retail is one that cannot be ignored.

According to the BRC/KPMG analysis, online shopping accounted for 40% of sales in July, as people look for safer and more convenient options in these unprecedented times.

As a result, overall footfall remains low, with separate analysis suggesting a 40% year-on-year drop. Such a significant decline represents the best results since February, highlighting the challenge facing bricks and mortar retail.

The trend towards the online space has been apparent for many years, long before this pandemic. As a result, many experts believe this change to be much more long-term, with lock down having an irreversible impact on how people shop.

Beginning the Long Recovery

In these challenging times, any positive figures will provide optimism to the retail industry. Many online businesses, in particular, have managed to create new opportunities during the last few months. However, everyone is aware that the challenges presented by Coronavirus are in their early stages, and more obstacles will appear over the next few months.

Here at Expense Reduction Analysts, we’ve been working with major UK retailers throughout the Coronavirus crisis, helping to reduce retail operating costs through effective procurement strategies. Our sector specialists can help to find long-term cost savings in your supply chain, helping to provide an extra bit of breathing room for these uncertain times.

If you’re interested in discovering what savings we could make for your business, why not get in contact with our team?