All Hail Retail (SHOP in the NEAR)
18th June 2020
Since the Government published its Coronavirus recovery strategy, we have been moving quickly through the relaxation of lockdown in ‘steps’ and are now celebrating the large milestone at which non-essential businesses are permitted to reopen, if they can become “Covid Secure”. Now at Step 2, it is starting to feel like the return to normality of sorts, albeit with one-way systems, queues to enter shops and Perspex screens.
Learning from the past
Local retailers are celebrating today with shops able to reopen again after nearly three months of closures and news channels broadcasting busy high streets and long queues to enter stores. And while those who are keen to indulge in a bit of retail therapy – and grab a bargain – will be out in droves in the coming days, how do we expect the high street and retailers to fare once the initial fanfare has worn off.
With many employees continuing to work from home, our local communities will continue to play an incredibly important role in the near future, not only as we head to the shops to browse, but also as we catch up with friends and go out to our local watering-holes.
While we can’t know for certain how the next few months will look, especially from a retail and commerce perspective, we can look in a few places to get an idea of anticipated recovery. For example, we see how China, where Covid-19 originated, is recovering a few months post-lockdown, and we can also look back to Asia’s recovery following the SARS epidemic in 2003 for insight.
Of course, in 2003 e-commerce was in its infancy and the reliance on the High Street was far greater, but it is a good starting point. As one paper wrote: “Fear of SARS infection leads to a substantial decline in consumer demand, especially for travel and retail sales service. The fast speed of contagion makes people avoid social interactions in affected regions.” Sound familiar?
CNBC also reports: “The retail sector in China was one of the worst hit by the SARS epidemic. Growth in retail sales moderated to 4.3% in May 2003 – the slowest pace on record [at the time]”.
Economic recovery from Covid-19 in China is widely expected to take longer than it did for SARS due to the way in which China’s economy has become more domestically consumption-led in the 17 years since SARS. This growth in the service sector and decline in reliance on infrastructure and manufacturing is a key reason why it will take longer to recover. The service sector does not fare well when mass-restrictions on movement are put into place. But the retail sector did recover, and we expect it to do so after Covid-19 too, both in China and closer to home. We have already seen evidence of this in Ireland as people have been heading to cities, towns, and villages across the country as thousands of businesses re-opened for the first time in weeks. Upwards of 100,000 people visited Dublin, on the first day of phase 2 of the road map to re-open the economy. However, we all know that recovery will take a while and will lead to changes in the make-up of the High Street.
The main impact
Of the High Street retailers most likely to be affected, closures will largely come from the mid-market shops with numerous shops across the country, that cater to the masses. High rent costs combined with staff numbers means these stores have the largest overheads, combined with their customer base also being adversely affected by economic shakeups. In recent months Warehouse and Oasis have both called in administrators – although have interestingly had their online businesses bought out by Boohoo – , and Debenhams has recently announced the closure of three further stores meaning that since April, the retailer has said 20 stores will not reopen. The owners of Zara too, a High-Street staple, just last week announced the closure of 1,200 stores around the world.
Luxury fashion retailers will also be affected, not necessarily by UK customers, as they tend to be the least affected by changes in the economy. What will have a huge impact is the lack of international visitors, particularly Chinese tourists who spend vast sums of money on the luxury retail sector in the UK each year. Chinese tourists were estimated to spend between £764 million and £1 billion in the UK retail sector this year (Internet Retailing) before the Coronavirus outbreak and their spending power has already been seen back in action in China. Luxury retailer Hermes recorded record sales of $2.7m on the first day it opened post-lockdown – the store’s single-day sales tally is said to be the highest figure for a single boutique in China (business insider). Similarly, since shops reopened in France last week, luxury fashion boutiques in the French capital have been revamping their security measures to create a transformed high-end experience. However, whilst initially crowds flocked to the upmarket boutiques in Champs Élysées, traffic has since slowed down. It would seem that although shopping is not going away, it is changing with purchases being more considered.
Over the coming months there will be caution from shoppers about the economic impact of Covid-19, which will limit their spending, as well as a newly emerging anxiety about being in heavy footfall locations and enclosed locations. Making premises “Covid Secure” is not easy for businesses who have smaller footprints, or single entrances/exits. Some of the guidelines from the Government were created from the success of the Grocers management of crowds in the middle of lockdown, which includes limiting customer numbers inside and putting in place queuing systems outside, building Perspex screens to separate staff at tills and mandatory PPE for staff. For retailers this becomes tricky where browsing is so important to the retail experience, Waterstones, for example, has announced that any unsold book touched by a customer will be ‘quarantined’ for 72 hours before being put back on display. Fashion retailers too will have to limit the browsing experience, and many have announced the closure of changing rooms.
With many of us choosing to shop locally rather than travelling into city centres, larger shopping centres, many already in trouble before the crisis, will be some of the hardest hit in the immediate months following the lifting of lockdown restrictions.. In recent months UK shopping centre owners Hammerson’s market value fell to £1.21 billion while Intu announced a £2 billion loss in 2019, placing it on the verge of collapse unless it receives further emergency funding (Retail Gazette). Westfield is also facing its own troubles, after a £600m expansion at Westfield London opened only two years ago, struggling to fill all its empty units as retailers held back committing to costly leases during Brexit negotiations.
With this in mind, ‘Destination’ shopping locations may not be our chosen destinations for a while, as we choose to stay local and shop in less crowded places. People are also increasingly recognising the importance of supporting smaller, independent businesses instead of the big multi-nationals owned by billionaires. Might this be the unexpected renaissance of the local High Street run by communities and local business owners?
The good, the bad and the local
Bigger chains and businesses may well see a long-term impact on sales from their behaviour and actions during this crisis. 21% of Brits have already convinced other people to stop using a brand that has not acted appropriately during the pandemic (Edelman), and perhaps this is why:
- Arcardia owners Sir Philip Green and Lady Tina Green, worth reportedly $2.1bn, have come under fire for withholding rents to landlords and stopping pension payments to staff. Arcadia has put all staff on Government-paid furlough despite his businesses being registered in the tax haven of Monaco
- Sports Direct boss Mike Ashley was criticised for refusing to close his shops when the initial lockdown came into force, claiming that his employees fell under the key worker status because he sold exercise equipment. There was such a huge backlash from the public that he later made a U-Turn on his decision
- The banks have been criticised for not doing enough to help people. Lloyds and RBS, in particular, have come under fire, having been bailed out using taxpayer money in the 2007-8 recession and seemingly now not willing to help customers out with financial support.
It has not been all bad behaviour on the high street however:
- Beauty and cosmetic giant LVMH switched their production line to produce hand sanitiser, as well as alcohol brands Brewdog and AB InBev also doing the same
- High Street fashion retailer H&M has re-purposed its supply chain to produce PPE equipment for front-line medical staff
- Supermarkets went on hiring spree to help with increased demand, whilst Co-op went one step further and donated £1.5m worth of food to foodbank charities and Tesco gave all frontline staff a 10% bonus.
Some of us may well forget the actions of big businesses when faced with a bargain from Topshop in the future, but many others will not. When we have an abundance of choice both off- and on-line we can choose to shop with companies who share the same values as us. That’s why we have been seeing a huge surge in eco-friendly fashion as the alternative to environmentally devastating fast fashion. Our values will come through more than ever once this crisis is over, and a re-alignment of what local community means will be one of the good things to come from this tough time. Research from Attest has shown that 17% of respondents agreed that COVID-19 has already made them rethink their approach to style and shopping and question how much they need to buy.
Out of home can play a vital role in helping retailers engage with shoppers, locally and nationally, as we move out of lockdown.
Bricks and mortar sales still account for 81% of all retail sales, according to the Office for National Statistics Retail Sales from September 2019. This means £8 in every £10 spent on shopping takes place on the High Street. Using proximity OOH to nudge people into store is proven; research from a luxury high street retailer showed that those exposed to proximity OOH were 164% more likely to take an action as a result, including driving shoppers online.
It will be essential in the coming months to drive footfall into stores in a responsible way, as social distancing remains for the foreseeable future. So, while a ‘push’ message might come across as irresponsible in proximity to a busy store, a brand-led message might be more appropriate. On DOOH we are able to react with immediacy to real-time footfall changes in stores with sensor technology to ensure the right message is displayed at the right time. For example, when store footfall is low, messaging driving footfall is prioritised but can then switch to a brand-level message or messaging driving traffic online when store footfall is high.
While shops have limited or restricted capacity, many retailers will want to drive traffic online, and OOH can do this to great effect. Online-only fashion retailers have been using OOH for years to deliver broadcast reach and raise awareness, with brands such as Boohoo and Pretty Little Thing building their businesses on the power of OOH driving consumers online.
OOH technology will also be able to help retail-specific challenges such as changing room closures. With AR Technology, customers will instead be able to try on clothes in the comfort of their own home before heading to store to purchase. We anticipate that AR technology usage will accelerate significantly this year.
Local versus global
Although OOH reaches 98% of the UK population, there might not be a one-message-fits-all solution. As many people remain primarily in their local communities, it is worth considering a localised approach at a national scale. Digital OOH is perfectly suited to do this with its dynamic capabilities and agility to switch or update messages instantaneously and incorporate a location-based message. The latest Route release states that (in normal times) DOOH now reaches 82% of UK adults each week, as per the graphic above from Route., increasing further for many demanded audiences.
Posterscope’s landmark Moments of Truth research in partnership with JCDecaux and Clear Channel highlighted that while DOOH creative optimised for relevant content and relevant moments delivers a 32% increase in brain response, only 8% of DOOH billings are currently dynamic. Ensuring messaging is relevant to consumers will help drive engagement and brand awareness.
Making creative for a localised OOH approach is also incredibly simple. With templated ad-containers for Dynamic creative, creative agencies don’t need to create thousands of copy adaptations. Moreover, with OOH creative usually much more straightforward versus a TVC, OOH will be a good solution for building national reach while TV ad production is hampered by social distancing.
When looking at a more localised approach to OOH, it is also worth considering environments and formats which may not have been regular features on OOH plans previously. More ambient formats environments such as Gyms, Leisure Centres and local shopping hubs will likely have higher audience impacts in the immediate weeks and months after the lockdown ends, as people return to previous routines. It’s also worth considering more ‘guerrilla’ techniques such as local street art, murals and stencilling which will really cut through during this time.
Posterscope’s No Single Point of Truth approach will be incredibly crucial over the coming months, to ensure we are targeting our audiences in the right locations and to understand where these local community hubs are located across the UK. Our approach is that there is no one data source that can tell us everything we need to know about our target audience, instead we tap into multiple data sources from Demographic, Mobile Ad-Tech, Telecommunications and Transaction data. It can help pinpoint locations of new shopping hubs, show how our travel patterns have changed, and detail how audience hotspots may not be where we expect them.
Trusted and efficient
Out the other side of Covid-19, OOH will be a critical channel for brands to shift brand metrics and equity scores, especially important during times of economic uncertainty. OOH is well placed in this recovery due to its ability to reach large audience volumes very quickly, which is essential for shifting brand metrics scores. Of those metrics, OOH particularly excels at is trust, which at times of economic downturn time is even more important to communicate, as consumers look to spend their money on products and brands they trust.
All Hail Retail
There is no doubt that shopping as we know it, will remain changed for some time yet. Appetite is of course there; we will simply see retailers adapting and evolving to ensure customer safety.
One thing for certain, is that while there will be both winners and losers on the high street, more importantly, there will be opportunities for new businesses to develop and succeed – let’s not forget that after crisis follows a period of rapid innovation… and so we should be positive in expecting new businesses, new approaches, and new experiences on our High Streets.