Business management

The great retail reopening: what to make of it so far

David Scott, national head of leisure and retail at NatWest, reviews the first week of shops reopening their doors, and what the brave new world means for the future of retail.

Demand will be lumpy

As shoppers rushed back, I was surprised by the high level of pent-up demand, but over recent years shopping has become a leisure activity. And it’s clear those people queuing for hours last Monday morning were desperate to enjoy that again and wanted something different to do after months of lockdown.

But despite shoppers’ initial enthusiasm, retailers face a huge challenge to survive this new normal. As Richard Lim, chief executive at Retail Economics, pointed out, in countries that reopened shops a few weeks ago – France, Germany, Italy – foot flow was way down on last year. Socially distanced waiting outside stores (potentially in the rain), limited customer numbers in shops, one-way systems, restrictions on handling products, closed fitting rooms, hand sanitisers, face masks, protective screens – they are all barriers to customers enjoying spending time and money in shops the way they once did.

Retailers are tentative

Gone, too, for the moment, are the other immersive experiences of a day’s shopping – breaking for lunch or for a drink at a pub; or combining it with a trip to the cinema or bowling alley. These additional attractions will not be available, at least not how they were, for a while yet.

So retailers must think hard about how they navigate the next weeks and months. In the early days of lockdown, retailers were thinking merely about how to survive – many, for instance, boosted their online presence – and although they are now reopening their doors, I think that mentality to merely ensure sustainability has to continue. 

Richard Lim also stressed businesses that throw everything at reopening immediately will struggle, but retailers that open up slowly and steadily – perhaps with phased reopenings in targeted areas, gradually looking at how to open up facilities such as fitting rooms and learning from those small steps before rolling out more widely – will probably be the ones that survive and succeed. Trying to do everything at once just gives you all your normal fixed costs without the income. 

Analysis is needed

To ride it out, retailers need to understand what successful looks like. They need to understand customer data, foot flow, and customer habits, and focus their efforts accordingly. 

In both the short and the long term, it’s about connecting with customers. Their confidence is damaged, they are cautious and anxious, and they need to be reassured that they are safe

David Scott
national head of leisure and retail, NatWest

Initially, we’d expect a high foot-flow sales-conversion rate – the last few months have conditioned us all to enter a shop for a specific item, buy it and leave as quickly as possible – so they need to work harder at encouraging them to browse, maybe by rearranging their store layout. They need to manage their stock and focus on looking after their supply chains – they might discount existing stock, but that impacts profits, so they have to consider if this is viable. And if they have shifted online, they need to decide how much of that stays online and combines with their bricks-and-mortar store.

It’s likely that retailers and landlords may need to find a new rent model – businesses have received huge government financial support, but it will still be some time before sales return to pre-coronavirus levels, leaving retailers to pay expenses without the levels of income they enjoyed previously. We may need landlords to set rents based on foot flow and sales rather than turnover.

Creative solutions are much needed

But there are other ways to find a way through the crisis. Retailers could link up with neighbours and other businesses for creative partnerships that give mutual benefits – we may see a retailer teaming up, as Marks & Spencer has with Deliveroo, to provide a service that complements their own business.

In both the short and the long term, though, it’s about connecting with customers. Their confidence is damaged, they are cautious and anxious, and they need to be reassured that they are safe. The shopping experience has been turned on its head, and safety is now customers’ number-one priority. 

Shops must be socially responsible

A few customers will grumble at the queuing, the distancing or the one-way systems, but the majority will expect stores to look after them. That means they will expect distancing, PPE, hand sanitisers and a seamless shopping experience with contactless payments – you don’t want to have been protected by masks and screens and then have to pay cash and get potentially contaminated change from a till – but it also means policing the store and enforcing the rules to keep people safe. 

Many of us saw the news pictures of the scrums and complete lack of social distancing as shoppers rushed to get into newly reopened stores. If there is a second wave and shops are forced to close again, customers will remember which ones enforced the rules – and those that didn’t.

I’m cautiously optimistic about the future. Unfortunately, not all retailers will make it. Those that have taken on too much debt and haven’t shown value will suffer, while those nimble enough to pivot and adapt to new customer expectations will come through. 

The reality is that, for some time to come, the pounds in customers’ pockets will be worth less and they will want to spend wisely – which means retailers need to ensure those customers go into their store rather than the one next door. 

The ones that survive and thrive will be the ones that are really on top of who their customer is and how to attract them through product or service – and can prove they really value both their customers and their staff.

This material is published by NatWest Group plc (“NatWest Group”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by NatWest Group and NatWest Group makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of NatWest Group, as of this date and are subject to change without notice. Copyright © NatWest Group. All rights reserved.

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