Coronavirus lockdown will speed up demise of weakest retailers

The closure of non-essential retail in the UK, now extended for three weeks, equates to 382 million square feet of physical space out of action. This space would have generated £14.5 billion of sales over that period based on 2019 data, according to GlobalData.

Maureen Hinton, Global Retail Director at GlobalData, comments: “Measures to stop the spread of Covid-19 in the community is hitting non-food retailers the hardest, particularly clothing specialists, which account for 36% of these lost sales.”

She adds: “While some of these sales will have transferred online the majority will not be recovered, speeding up the demise of the weakest operators and the permanent closure of even more retail space.”

Miserable March

The aforementioned measures led to the worst decline in UK retail sales on record last month.

Research by the BRC and KPMG shows that on a total basis, sales decreased by 4.3% in March, against a decrease of 1.8% in March 2019. Sales before and after the lockdown (23rd March) contrasted sharply. In the first three weeks of March, they grew 12% on a total basis but declined 27% in the last two weeks of the period.

Food and essentials faced an unprecedented surge in demand in the early part of March, only to drop significantly into negative growth after the lockdown and introduction of social distancing in stores. The closure of non-essential shops led to deserted high streets and high double-digit declines in sales which even a rise in online shopping could not compensate for.

Sales of computers and accessories, board games, and fitness equipment all rose sharply as a result of the move to home-schooling and work-from-home. In contrast, demand for the latest fashion ranges significantly declined.

“The crisis continues; the retail industry is at the epicentre and the tremors will be felt for a long while yet. Many physical non-food retailers have been forced to shut down entirely or to limit themselves to online only to protect customers and staff,” said Helen Dickinson, Chief Executive, British Retail Consortium.

“Consequently, hundreds of thousands of jobs at are risk within these companies and their supply chains. At the same time, supermarkets brace themselves for lower sales, while still spending huge sums on protective measures, donating to food banks and hiring tens of thousands of temporary staff. We welcome the government’s actions to date, yet millions of livelihoods rely on their continued support.”

“An uncertain future lies ahead and the industry’s reset button has clearly been pressed. Smart retailers will already be thinking about what this means for the future, but the resilience of the sector cannot be underestimated. Likewise, we cannot overlook the huge contribution many retail workers have made to help the nation during the crisis,” commented Paul Martin, UK Head of Retail, KPMG.