The country is in lockdown and retailers of goods and services not deemed essential have been ordered to shut stores. As the industry finds itself in uncharted territory, Retail Week analyses how businesses can operate and what it means mean for the future of multichannel retail.

  • Businesses without fully-fledged ecommerce offerings may be forced to leverage partnerships more
  • Hotel Chocolat’s Angus Thirlwell on the need to ensure communications are relevant
  • How retailers in Asia and Europe are adapting customer communications and selling techniques during lockdown
  • Why coronavirus may be the ‘final nail’ for bricks-and-mortar-only retailers

On Monday night, Boris Johnson effectively put the nation into lockdown in a desperate bid to stop the spread of coronavirus from overwhelming the NHS.

Alongside telling people to stay in their homes other than to buy food or exercise once a day, the prime minister ordered the closure of all “non-essential” retail stores for at least three weeks.

Boris Johnson lockdown

Boris Johnson told ‘non-essential’ stores to close in an address to the nation

The official government guidance on essential stores takes in grocery shops, market stalls, pharmacies, petrol stations, homewares stores, as well as bicycle shops and pet shops. Retailers in categories such as fashion and electricals have been forced to shut and to rely purely on their ecommerce arms – if they have them – to trade.

For many retailers that either totally or predominantly relied on stores for sales, the new measures have put them in a bind.

High street fashion giant Primark, which has no ecommerce channels, is a case in point. Owner Associated British Foods effectively said it would simply need to ride the virus out and estimated it would lose up to £650m of sales.

While powerhouses such as Primark may have the financial strength to survive catastrophic downturns, many bricks-and-mortar and even multichannel retailers, already struggling in a brutal trading environment, do not.

Forced into this strange new reality, what can affected retailers do to stay relevant and engaged with customers, and what will this crisis mean for the future of online retail?

Cash is king

For Peel Hunt analyst John Stevenson, the biggest challenge is “cash and liquidity,” even for those retailers which have positioned themselves best with their ecommerce propositions.

Fashion giant Next, which has been one of the great multichannel success stories over recent years, flagged last week that online sales alone would not make up for the fall in overall revenues as a result of the virus.

Chief executive Lord Wolfson said sales could drop anywhere between £445m to £1bn this year, and that all channels including online would be affected.

This slump in demand was what Wolfson called “by the far the greatest challenge we face” and Peel Hunt’s Stevenson says it will be particularly hard for fashion retailers.

“Just because you’ve got a website, doesn’t mean people are going to shop,” he says. ”If people’s mindset is toilet roll and rice, flogging them swimwear isn’t going to happen.”

“Those who don’t already have online operations will not be able to set them up from scratch. Instead, there will be more partnerships between retailers and channels such as marketplaces”

Julie Carlyle, EY

Even so, Practicology general manager Nicola Hollow believes retailers that have previously operated without an online operation will need to reconsider in the coming weeks and months.

Although businesses such as JD Sports have said online sales represent only “comparatively small mitigation” for overall sales declines, Hollow thinks it is likely that coronavirus will trigger a more fundamental shift in channel spend longer term.

She says: “It might be that multichannel retailers think they cannot take much revenue from online in the current world, but after all this is over I wouldn’t be surprised if online penetration goes up massively and stays up.” She points to the 2003 Sars epidemic in China as the trigger for mass online retail adoption there.

She also says many businesses that have previously had reservations about the value of an online business will have to “get off the fence pretty quickly” or risk missing out on sales or brand awareness.

As well as listing on ecommerce marketplaces such as Amazon, Hollow suggests single-channel retailers that have so far avoided an ecommerce presence consider a more curated approach.

She points to TK Maxx, which offers a selection of its product range online based on items that have margins that allow online orders to be fulfilled profitably, as representative of an approach that previously single-channel retailers such as Primark could pursue should they decide to go online.

EY retail chair of audit insights Julie Carlyle agrees and says many retailers should seek to collaborate with other brands, marketplaces, hospitality businesses and logistics services

She maintains: “Realistically, those who don’t already have online operations will not be able to set them up from scratch at this time. Instead, there will be more partnerships between retailers and channels such as marketplaces, or certain brands with retailers that already have an online presence.

“We may also see some collaborations between brands and those retailers deemed essential who have remained open.”

Could online follow bricks-and-mortar into shutdown?

While online demand has risen in some categories, most obviously food, marketing budgets are being cut by many retailers as they seek to conserve cash and reduce costs – DFS, which has also suspended deliveries, and Halfords are two examples.

Retailer warehouse

Concerns have been raised about the health and safety of staff in ‘non-essential’ retailer warehouses

That makes sense, says Matt Truman, chief executive and co-founder of retail innovation and investment group True Global. He believes it is possible “the curtain comes down” on online retailing of inessential goods as well in stores, as concerns about the proximity and safety of warehouse and delivery staff grow.

He argues: “I don’t think businesses can afford to market because the cash burn is so high, especially if you’ve got leverage”. He says that businesses he is familiar with are “cutting marketing to zero” to take into account the possibility of online shutdown as well as the need to prioritise other areas of investment or meet stock commitments already made.

Numerous retailers across various categories including New Look, Watches of Switzerland, N Brown and Card Factory have all this week announced measures to reduce marketing spend.

So far as online marketing is concerned, Practicology’s Hollow believes there are two schools of thought emerging: those that view it as a waste versus those that see it as a “great opportunity to build community” with customers.

She believes it can be justified depending on what sort of products are being sold, pointing to fitness brands and sports and leisure retailers as an example of types of businesses that could create new marketing using, for instance, home workout videos in a way that resonated with customers unable to go out.

However, ‘non-essential’ retailers also find themselves having to negotiate a fine line communicating with customers whose minds are elsewhere.

Co-founder and chief executive of specialist retailer Hotel Chocolat Angus Thirlwell says the key is to get the message right. For example, the retailer has offered all NHS staff a 50% discount for the duration of the crisis, which Thirlwell says has been “immensely well received and taken up”.

“What we as a team want to talk about is the ethical dimension of the brand,” says Thirwell. “We’re also making sure that all of the content we put out is relevant”.

Jewellery retailer Pandora, meanwhile, has made the decision to focus on digital marketing, according to UK and Ireland managing director Kate Walsh. 

Walsh says the goal is not just to drive traffic to the brand’s ecommerce arm, but also to “ensure our customers feel in tune with what Pandora is doing and part of our community”.

“People can’t see their families and friends at the minute, so the ability to be able to send them a gift that is going to bring them a bit of joy and happiness at this time is appreciated”

Angus Thirlwell, Hotel Chocolat

EY’s Carlyle takes up the point and says now is the time for retailers to “do the right thing”.

A survey by EY in 2018 revealed 86% of consumers base their buying decisions on how a brand treats its customers and what it does for society – and with the coronavirus pandemic, Carlyle says this figure must now be above 90%.

For retailers to stay front of mind for customers without physical stores being open, Carlyle says they need to maintain a flow of information via email and social media but also become a part of the local or national community.

“As customers increasingly turn to social media, both for information and to stave off boredom, retailers need to be careful of what and how they communicate. Retailers need to avoid over-commercialism, instead focusing on social issues and keeping its people safe, as ‘bad profits’ could inflict long-term damage on the brand.

“Retailers should also consider implementing initiatives to support society in a difficult time, for example repurposing their operations to help community response teams. This will keep them front of mind for the right reasons.”

Co-founder of analytics specialist DynamicAction Michael Ross agrees those retailers that act with integrity, and take care of their customers, staff and community, will be “rewarded in the future”.

“Clearly retailers who are acting with purpose will be the winners. At the other extreme, retailers who are acting as if nothing has changed or those who inundate their customers with updates risk alienating people.”

Ross gives the example of Ralph Lauren, which announced it would fund delivering meals to hospital workers, using its money and infrastructure for good.

Thirlwell says the retailer has been marketing to customers around self-isolating at times like Mother’s Day and Easter. He says even if people can’t see their families, the ability to send them gifts is important. 

“People can’t see their families and friends at the minute, so the ability to be able to send them a gift that is going to bring them a bit of joy and happiness at this time is appreciated. It’s simple stuff, but it’s amazing how can lift an otherwise depressing day,” he adds.

Lessons from lockdowns

In the same way that the British government is looking to Europe and Asia for some guidance around its coronavirus response, retailers are also looking overseas for insight and inspiration as they seek to navigate the crisis.

Springfield Tendam

Spanish fashion retailer Tendam has told its customers: ‘We are here to keep your lives as normal as possible. We just want to serve you and help you’

A number of countries including China, Italy, Spain and Germany have already experienced or are in lockdowns similar to that ordered by Johnson this week.

With all but non-essential stores closing their doors, heightened importance has been placed on retailers’ digital communications and ecommerce capabilities. But against the backdrop of a global health emergency, there is a fine balance to be struck between empathetic messaging, seizing commercial opportunity and driving innovative selling techniques.

For Ignacio Sierra, a senior director at Spanish retailer Tendam, the retailers that will succeed in the longer term are those putting the wellbeing of their staff and customers top of their agenda. It is a particularly pertinent point in a nation whose coronavirus death toll has surpassed China’s.

“This is the era of empathy,” Sierra tells Retail Week. “If you do not behave correctly, people won’t appreciate that and they will remember that. It’s a time to do meaningful things – if you have a strong foundation and resources and you can do something to help people’s lives, do it.

“It’s really relevant not to be commercially oriented. People have fears, they are afraid. We have to listen to our customers. We are saying: ‘We are here for you. We are here to keep your lives as normal as possible. We just want to serve you and help you’.”

Social media platforms will be key in communicating that message – and retailers in China are using them to good effect. Brands like MaxMara used WeChat to share information and images of products that it thought would benefit its customers while they were in lockdown.

Store WPP chief executive and China retail expert David Roth says the key to using such channels is to be “helpful and supportive in a relevant way”.

“Out of sight means out of mind. The challenge is how you [engage consumers] in a relevant way that is empathetic to the new situation that your customers are in,” he explains.

Luxury fashion retailer Lane Crawford, which has stores across Asia, has taken that approach to a hyper-personalised level during the pandemic. In China, its store staff picked and packed individual packages, wrote personal notes to customers and even took videos to record the hygiene measures they had taken to ensure their orders were safe. Its stylists also compiled personalised wardrobes to send to customers’ homes.

“Members of our teams have been in constant communication with our customers,” Lane Crawford president Andrew Keith says. “This has not been driven by a need to sell, but by people who genuinely care for each other, who want to stay connected at a time when so many people have been isolated and feel the collective strength of everyone pulling through this together.”

“Longer-term thinking is starting to set in and you are seeing more strategic approaches from retailers. There is upside opportunity in the market because this crisis will change shopping behaviours”

Boris Planer, Edge by Ascential

Amid the prevailing need to be empathetic and altruistic during the crisis, retailers in locked down nations have also sensed and seized opportunities. Lane Crawford, for instance, has registered a “triple-digit spike” in online sales in China, as shoppers forced to stay indoors splashed out on home, lifestyle and beauty products. In Hong Kong, Lane Crawford has started offering free next-day deliveries to entice customers who can no longer venture to stores.

In France, Carrefour has created preassembled baskets of health and beauty products, or items for cats and dogs, which shoppers can order to be delivered to their doors.

“Clearly that is helping people during tough times, but Carrefour is also using this as a vehicle to help people into subscriptions,” Edge by Ascential’s director of go-to-market intelligence, Boris Planer, suggests.

“Longer-term thinking is starting to set in and you are seeing more strategic approaches from retailers. There is upside opportunity in the market because this crisis will change shopping behaviours and lead people to shop online and buy into subscription and auto-replenishment schemes.”

Other new and innovative routes to market are also emerging. The adoption of livestreaming is accelerating in popularity during lockdowns, particularly in China, where businesses are blending retail and entertainment to good effect. Alibaba’s Taobao marketplace, for example, is home to more than 4,000 livestream hosts, who generate 150,000 hours of video content every day. Customers can shop for over 600,000 products through livestreams on a daily basis – and a growing number of global brands are seeing the potential.

Live streaming retail

Livestreaming is big business for retailers in China

Forest Cabin, a Shanghai-based skincare brand with a store-based model, experienced a 90% slump in physical sales over the Lunar New Year. But it achieved 45% year-on-year growth by mid-February after store sales staff livestreamed on Taobao.

Just last week – in the thick of China’s lockdown – sportswear giant Adidas hosted an exclusive online debut of its limited-edition Superstar trainers. The livestream attracted 2.2 million views and generated ¥200m (£26.4m) in just 10 hours.

“For merchants across different industries, livestreaming has become an integral tool in reaching consumers during the outbreak – not only to offset the decline in offline business but also to encourage creativity in marketing and developing customer relationships,” Alibaba general manager for the UK, Netherlands and Nordics, David Lloyd, says.

“But livestreaming is not seen just as a means of marketing or driving sales – it’s also being used to allow brands to connect on a more human level. For example, businesses across China are increasingly using livestreaming to train employees and build partnerships.

“China’s second-largest home-improvement and furniture retailer, Easyhome, said that its 232 staff generated nearly 5,000 livestream sessions with an audience of over 3.5 million in just one week during the coronavirus lockdown in China.”

The boss of one Asian retailer predicts marketplaces like Alibaba, Amazon and Ebay will be “the big winners” during the pandemic, since consumers “want everything delivered to them, without too many different delivery people knocking at their door”.

He suggests that as that reality dawns on bricks-and-mortar retailers, it is starting to drive a fresh wave of collaboration between retailers and ecommerce platforms.

“There’s a lot more acceptance among retailers that marketplaces and online platforms are not to be seen as competitors but should be seen as collaborators,” he says.

“The barriers seem to be falling and retailers want to be out there in different channels, in different formats. This crisis will spark a sea change for that thinking. Retailers without a strong online proposition will be scrambling to improve because being multichannel will separate the winners from the losers of this.”

China is now emerging from its lockdown – and Roth concludes: “Those brands that did nothing and laid low are getting hit twice – once on the way down and, as we start to see recovery, now on the way up. They are being penalised by consumers in favour of brands that were visible and seen to be supportive during the depths of the crisis.

“You can keep front of mind without physical store space, but if you have not invested in creating strong social and digital capability, it will be challenging.”

Multichannel acceleration

The coronavirus pandemic will have a profound effect on how consumers shop, live and work in the future. Its effects on the balance between sales in-store and online will be equally as seismic.

Hotel Chocolat

Hotel Chocolat’s boss believes ‘there’ll be a yearning to mingle more and get back to the conviviality’ after the pandemic

Thirlwell expects that, once the pandemic passes, consumers will have become used to the “joys of online ordering” and predicts ecommerce penetration in the UK will have jumped forward five years in terms of consumer take-up by the autumn.

“All the lines of trajectory that were happening anyway have been accelerated by five years. That is by the time we get around to the autumn, it’ll effectively be 2025 in terms of the evolution of online and physical retail,” he says. “The best physical retail will still be immensely attractive for returning customers, but they’re going to want more than they got just by making a few clicks.”

Peel Hunt’s Stevenson says a number of categories such as furniture and health and beauty, which have been more resistant to going online previously, will seek to make the shift in future as the market expands. 

Carlyle believes because the pandemic means more people will probably shift working patterns so more people work from home, when shops reopen there will be a shift in what is expected online versus in-store propositions.

“Retailers will absolutely need to have an online presence when the pandemic is over as more spend shifts to online.

“As people have become used to avoiding stores, those retailers wishing to entice people back to the physical store spaces will also have to offer an incredibly different experience,” she says.

“You need to have a transactional commerce capability and active social network community, period. One of the lasting impacts of this crisis will be to accelerate consumers’ online purchase behaviour”

Michael Ross, DynamicAction

DynamicAction’s Ross also predicts there will be a rise in retailers implementing ship-from-store, as retailers with excess stock in their branches will need to ensure inventory does not go to waste.

While all agree that stores will still play a role in the future of retail, WPP’s Roth says the coronavirus epidemic will put the “final nail” in the debate of whether businesses can operate without ecommerce in the future.

“In case anyone was still not convinced that not having an online presence was optional for a retailer today, let this be the final nail in that debate. You need to have a transactional commerce capability and active social network community, period. One of the lasting impacts of this crisis will be to accelerate consumers’ online purchase behaviour – both numbers and frequency.”

He says businesses “behind the curve” now should use the time to “plan your ecommerce strategy and implementation” to be able to hit the ground running when things return to some semblance of normality.

For some, however, the simple fact is they may not be afforded this time. As grim as it may be, it is becomingly increasingly clear that some retail businesses will not survive this period.

However, for those that come through, Thirlwell believes human nature means there will always be a future for retail stores.

“When we all come out of this, that is a part of the human condition. It’s what defines us as a species – to congregate together. That won’t go away any time soon,” he says.

It’s a comforting thought in a time of uncertainty. If retailers can be there now for their customers when they need them most, they will, in turn, be there for the industry when the crisis is over