COVID-19 Webinar 3: Impact on the Retail Sector
Thursday, 28th May 2020

A long road to recovery
UK retailing has been facing the ultimate stress test over the last three months, according to Stephen Springham of Knight Frank, who moderated this SPR webinar on the impact of the COVID-19 pandemic on the sector, the third of four such webinars to be held by the Society.

Retail real estate was clearly in a very difficult environment even before the lockdown hit, with the high street undergoing wider structural change, of which the rise of online was one of the key catalysts. In one of a number of polls during the session, the audience reckoned that 21-25% of retail sales will take place online by April 2021, although this is a bit lower than current levels of around 30%.

James Collins of J Sainsbury PLC, one of the panellists, noted that a similar trend, albeit at a lower level, had been witnessed for their online grocery sales, which have risen from 7% at the start of the year to some 14% now.  Whether this pattern persists into the future will depend on how consumers’ behaviour changes as the lockdown eases, but he predicted an out-turn somewhere between these two points.

Retailers are looking forward to June 15, when non-essential stores will be allowed to re-open, which will raise the share of the market that is potentially allowed to trade from the current 17% - the share of essential retailers pre-lockdown - to some 71%, according to Lucy Stainton of The Local Data Company. Most of the remaining 29% is in hospitality. She suggested that particular uncertainty surrounds how city centre retailing – especially in London - will fare at this stage, as there is likely to be little passing trade from office workers and tourists.

Joe Oxley of intu stressed that many retailers are set to take a phased approach to opening, as already announced by John Lewis, but his organisation have been working hard through the lockdown to put controls in place to allow social distancing in their centres.  Matt Soffair of LGIM agreed that health and safety – especially in managing customer flow – will be key to a successful re-opening, although it will be a challenge to provide a positive customer experience and keep spaces looking attractive.

Which parts of the retail landscape will be hardest hit by the pandemic medium-term? Stainton proposed that estate agents, travel agents, pubs and women’s fashion could be worst affected, with Springham agreeing that fashion already had a growing problem of oversupply.  In another poll, 42% of the audience thought retailing as a whole has 11-20% more space than it needs.  Collins suggested this is somewhat less of a problem for groceries as supply has been more constrained recently, although some of Sainsbury’s convenience outlets serving city workers have closed during the pandemic.

The consensus among the panellists and the audience was that recovery would be a long process, with pre-COVID trading levels not being attained again until mid-2021. Nevertheless, the panellists all believed the high street still has a future.  Soffair proposed that good retailing would survive but that the industry as a whole needs to change, while Oxley insisted that shopping remains a popular leisure activity that people are looking forward to resuming.  Collins noted that flexibility and the ability to respond to customers’ needs – e.g. supermarkets developing click and collect – are likely to be key, while Stainton said that the pace of change on the high street is accelerating, but this means new stores opening even as others are closing.

Tim Horsey