Data released over the past few days has laid bare the extent of the challenge the UK economy faces over the coming months and years. 

Yesterday, figures from the Office for National Statistics showed the number of people employed in the UK tumbled by 220,000 between April and June. 

It was the largest quarterly increase in unemployment since July 2009, when Britain was reeling from the global financial crisis. 

“There is no easy way out of such a deep recession and no simple solution to stimulate consumer spending”

This morning, the nation officially plunged into recession after gross domestic product fell 20.4% in the second quarter of 2020. 

It means the UK has entered the deepest recession on record – and the worst of any European country following the pandemic, the impact of which will be felt by businesses and households for some time to come. 

Boris Johnson has already sounded alarm bells, warning this week that the UK economy has a “long, long way to go” before it improves. 

Storm ahead

Against that backdrop, analysts have cautioned that unemployment will worsen in the coming months as the government’s furlough scheme winds down, suggesting this week’s figures merely represented the “lull before the storm”.

Without wishing to be a doom monger, a number of painful years lie ahead for retail – there is no escaping that fact. There is no easy way out of such a deep recession and no simple solution to stimulate consumer spending.    

But with the crucial golden quarter just seven weeks away and “a Christmas like no other” – as one executive described it to me this week – looming large, retailers must conjure up inventive ways to recession-proof their businesses and convince consumers to loosen purse strings that are likely to tighten further as we head into winter.

“Sensitive messaging that says ‘we’re here for you’ rather than ‘come shop with us’ will win customers’ support”

It is anyone’s guess how peak will pan out this year. In previous post-Brexit referendum Christmases, the retail mood has been bullish. There was a sense that despite a turbulent political and economic backdrop, people would still be keen to treat themselves during the festive season

This year has a different feel about it – the economy is at its lowest ebb in centuries, there are almost three-quarters of a million more people out of work now than there were in March and consumer confidence is fragile at best. 

Admittedly, the economy has improved during the two months since lockdown measures eased but we are not experiencing the V-shaped recovery Westminster had hoped for. 

Flight to value

Retailers will need to be closer to their customers than ever before, be frugal and strategic with their capital expenditure, and ensure they strike the right tone in marketing during the Christmas period.

On the latter point, one retailer suggested this week “the customer mindset has changed dramatically” during the pandemic. As a result, he says festive advertising from his business would “land a more thoughtful message” that will be “very community-focused”, rather than promoting the indulgence and cheer often associated with Christmas ads. The cost associated with producing and securing such TV time is also likely to be sizeably scaled back.

Sensitive messaging that says ‘we’re here for you’ rather than ‘come shop with us’ will win customers’ support not just during the golden quarter but beyond – at a time when retailers will need it most.

Value will arguably be more important than it has ever been as consumers shop around for bargains. Retailers that have traditionally veered away from deep discounting because of fears of the damage it could do to their brands could find that targeted price cuts are a necessary evil to entice customers. Such investment in price could reap greater rewards this year than spending on marketing otherwise would. There are already signs of a flight to value, as witnessed by the clamour to get into stores like Primark, Sports Direct and TK Maxx upon their June reopenings. That bargain-hunting trend is likely to persist into November and December. 

“Being in tune with customers, speaking to them in the right way and offering them the right product will be more crucial this Christmas than ever”

Price is never everything, though. Retailers will also need to display a degree of agility with their product proposition to ensure what they are offering does not just come at the right price, but is genuinely in demand with their customers.    

Just this week, Asos offered an example of what retailers can achieve when they do exactly that. The online fashion giant said full-year profits will come in ahead of expectations, a break from the mould that hard-hit fashion retailers have set during the pandemic. 

The etailer has shifted quickly over the past few months, moving away from occasionwear at a time when social events are on hold and focusing more on athleisure as customers seek comfortable clothes while working from home. 

Being in tune with customers, speaking to them in the right way and offering them the right product at the right price has always been central to success in retail, but it will be more crucial this Christmas than ever.

Those who do it best will overcome the challenges posed by the recession and have themselves a merry Christmas. For those that do not, it could be a long, hard winter.