Professor Leigh Sparks, Professor of Retail Studies, Institute for Retail Studies, Stirling Management School
In the first installment of the University’s Covid-19 bitesize lecture series, Professor Leigh Sparks discuses the impact of Covid-19 on retail and shopping. The virtual lecture is available to watch online, and a transcript is provided below.
We’ll talk today about retailing, shopping and Covid-19. Before we start, I’d like to make a couple of caveats. It’s very easy in a business presentation to think about businesses. But underneath that, we need to remember that this pandemic is very much a human tragedy: the large number of deaths in this country, but also the number of people who are worried and concerned about their jobs. And secondly, this presentation is written in the early days of May 2020. Things may well have moved on from this presentation, by the time that you hear it. But I would argue that the shockwaves moving through the sector and affecting retailing are fundamental and will continue to reverberate for quite some time.
So what are we going to cover in the presentation? I have split what I want to say into five things. I talk about retailing pre-Covid-19, lockdown and panic buying, what I’ll term shopping nightmares – the way in which we now have to shop and may have to for some time – then raise some questions and finally think about the policy possibilities for a different future.
Pre-Covid-19 retailing was not in the best of shape. There had been a massive overexpansion, especially in terms of out of town developments. We added stores, added floorspace. We’ve seen a change in the way in which consumers have been shopping, the rise of discounters, the rise of convenience and also added space. And over the last 20 years, there’s been a massive increase in Internet and online shopping, such that c20 percent of retail sales that taken by the Internet.
So lots of new space, different ways of shopping, different channels of shopping through the Internet. All this means we’ve got too many shops in the wrong places. This is often termed the death of the high street. I would argue, though, that retailing generally was not in great shape. We’re changing how we behave, how we shop. And so retailing pre-Covid was in a difficult place, not just in the High Street, but elsewhere as well.
When the pandemic hit, the government instituted a lockdown and it fundamentally split retailing into two areas, essential and non-essential. It’s a generalisation, but broadly food retailing was deemed as essential and non-food retailing in the main was deemed non-essential. Non-essential stores were no longer allowed to open. Online retailing, however, whether food or non-food, was allowed to continue when it could do so safely. The impact of that is pretty well known. In terms of grocery or food retailing, we saw what was termed ‘panic buying’ and UK supermarkets had a lot of their shelves emptied very quickly. With hindsight, the Kantar World Panel data shows that March 2020 was the biggest month of grocery sales ever recorded. It’s reckoned there were over 40 million extra trips in four days and about £10.8bn pounds extra was spent, about 20 per cent up on normal. This exceeds anything we would normally see at Christmas. But of course, for Christmas, retailers can plan. For this, they could not; hence the empty shelves.
In addition, with the closure of restaurants, cafes, work canteens etc, an extra 500 million or so meals had to be made in-home that previously would have been eaten out of home in any week. As a result, there was a lot more people buying a lot more product from the grocery retailers. By way of contrast, however, when lockdown came in, there was a footfall cliff in town centres, with a decline in footfall of 80 to 90 percent across a sample of town centres in the UK. As non-food retailing stopped working, as people stopped going into town and city centres, so the decline began even more precipitous, and we see this cliff edge.
We can also see a contrast in terms through the Scottish Retail Sales Monitor. The figure for March is very stark. In food terms, it rose quite substantially over 12 per cent. But in non-food terms, Scottish retail sales fell by c33 percent compared to last year. This is an enormous, an unprecedented decline in non-food sales in the country. What makes us think, however, is that April is likely to be even worse month as no retail sales in most non-food retailing has been present.
We can also see the impact of lock down in terms of a couple of leading retailing. Sainsbury’s in the early part of March and through the middle of March saw massive growth in grocery and food retailing and saw a decline in clothing, which has continued as lockdown has occurred. It also saw a massive decline in fuel sales as well, so has been heavily hit by the changes. Retailers such as Next have seen even more dramatic changes. Next is a business that has a very strong online presence as well as a strong store presence. The stores had to close; they were non-essential. Online was allowed to continue, but Next could not operate it very safely and as a result, eventually they shut it down and have only more recently reopened it. But again, the sales hit on a business such as Next is enormous. And then we need to think of the many small businesses who simply have not been allowed to operate in the non-food sector. This is why I term the situation a shopping nightmare.
What we’ve seen is a range of outcomes. We’ve seen a massive increase in online; in grocery, obviously, but also in some of non-food stores as well. Amazon has had a very good period during this time. Consumer confidence though is massively down. Retail confidence, particularly away from the grocery sector, is massively down and town centres have been hit. So this is really a traumatic experience for all concerned. And in shop, it’s an even more traumatic experience. These days, we’re having to learn how to shop safely in stores. We’re getting used to keeping distance, queuing outside, the number of people being limited in the store, protective screens for cashiers and for products, one way systems, and paying contactless rather than cash. And as B&Q show, we’ve got staff behind PPE and behind barriers for consumers. This is not how most people want to go shopping, particularly when they’re looking at it as a leisure experience more than anything else. So this is a real nightmare for consumers, but also for retailers.
We can, however, see some positives in this. One of the things we’ve seen has been the re-emergence of place, community and local stores. We’ve seen local stores, local convenience stores produce local home deliveries and link to their communities. We’ve seen a massive expansion in producers going direct to consumers and groups of retailers, groups of producers coming together to sell on the Internet. All of these provide an alternative to what is often seen as a scary shop. We also have to recognize that the government has stepped in and provided major support packages across the economy, but specifically for retail. Those have included a halt to business rates, something many retailers have been complaining about for many years.
So what questions can we ask coming out of that massive trauma that’s been inflicted on the retail sector and consumers? We don’t know how many shops will reopen. Some may never reopen. We don’t know when. We don’t know where they’ll reopen. And we also don’t know what shopping will be like, how they will operate. We don’t know where the shops can be profitable under social distancing measures and whether consumers will regain their confidence. And if they do regain their confidence and are willing to go to town centres, go out to shops, then will they maintain social distancing? And who is going to actually police that? In Australia on the 10th of May, as lock down began to ease there, some consumers talked about people “swimming in a Covid soup” as they didn’t socially distance in shopping centres. For many people, they were willing to take that risk. For others, they simply stayed away. So what shopping patterns, post-Covid-19 will persist? Will consumers continue to go to local stores and will they continue to buy online? Will they support artisan producers and other local producers as a consequence of the experiences they’ve had?
And that makes us think about what the policy possibilities might be. It’s really important now that we think about what we value. The immediate restarting of retailing will see much the same as before, though perhaps a more hollowed out sector with less businesses.
But what do we actually value longer term? We need to build a retail system and a place for all. In the middle of all this plenty, we have a scandal of food poverty, of a massive use of food banks and overall inequality, which Covid has demonstrated to us. We’ve seen, also, a massive resurgence in local and community focus. Maybe that makes us think we should value some different things. We should have a rebalanced sector between multiple, independent and cooperative retailers, but the digital and physical elements need to be rethought so we get the right balance for those, that we balance what we think about out of town, which is going to be very much carbon inefficient, to town centres, which are much more the social and economic heart of these communities. So what do we value? If we value local and a system that works for all, and a system that actually manages places rather better, then we need to think how we actually achieve this.
In some ways we could think about doing this through rebalancing taxation. So digital services are not taxed in the way that business rates have been, but we’ve shown we can get rid of business rates very quickly. So we need to have a digital tax. Shop workers have become key workers. So we need to pay them a basic income. We need to pay them fair wages and actually make sure they’re not living in poverty and living on foodbanks. We need to disincentivise damaging activities. So for out of town businesses that are reliant on the car, which is not going to be sustainable in the future, we need to think how we actually repurpose what they do or disincentivise many of their more damaging parts of what they carry out. The same goes for online business that don’t pay tax in this country. We could change VAT such that we actually don’t charge it on rebuilding existing (historic) buildings and refurbishing, but we do charge it on greenfield sites, the out of town sites as well. At the moment we have that the wrong way round. And if we do value independent small operators and local businesses, we need to provide them with economic protection. There are special incentives, the small business bonus schemes, reduction in rates, protection against some of the income things that we may need to bring in. We could then put a responsibility on local authorities to establish local markets, to build a local community. We’ve seen some tremendous initiatives develop over the last six or seven weeks about local producers supporting local and building local economies, keeping more money in those areas. So, we can do many of the things we want to do and re-energize our town centres, our communities and our local areas as part of the outcome of what’s happened over the last two months or so. It will, however, take a substantial will.
Much of what I’ve said today you can find on my blog stirlingretail.com. Over the latter part of March and most of April, I produced seven or so posts and many of the details that underpin what I’ve said can be found in those posts. So please have a look at those if you’re if you’re interested. Thank you so much for listening.
It’d be great if you could engage in the debate about policy for the future of retailing, for shopping, what we should do about town centres and multinational businesses as opposed to local businesses and local producers. And you’ve got my details on the slide: you can find me by e-mail, on the blog or indeed on Twitter. Many thanks.
Professor Leigh Sparks, May 2020