WITH the future of Sir Philip Green’s Arcadia empire hanging in the balance after the fashion business went into administration, it’s a stark reminder of why retailers need to be able to adapt to stay relevant to market conditions and customer demands.
The Covid-19 pandemic, with its ensuing lockdowns and restrictions on normal trading, has seen nimble operators ramp up their online offering and launch new post-pandemic services, while others have struggled to understand what their customers want and need.
As Perran Jervis, head of retail and consumer goods at TLT points out in the commercial law firm’s report titled “Rebalancing act: The impact of retail transformation on people and stores”, the Covid-19 pandemic has been a “real test of agility for retailers”.
In the report, TLT spoke to 100 leading UK retailers about how lockdowns, travel restrictions, an increase in online shopping and homeworking are reshaping the way consumers interact with their businesses. Jervis states: “Retailers have had to react quickly to a rapidly changing commercial and regulatory landscape.”
The report explains how retailers are transforming their business and the impact of that on people, jobs and stores. It also puts into sharp focus the opportunities that exist and how, in many ways, the pandemic has forced some retailers to tackle longstanding issues that they have not, until now, sought to or have not been able to address.
The changes taking place will inevitably have an impact on people and jobs – whether that’s in the shape of redundancies, redeployment or retraining, for example.
One fifth (19%) of the UK’s top 100 retailers say they will need to make redundancies as a result of the pandemic, rising to 26% among fashion retailers. However, despite the large number of store closures, it is not just these roles that are at risk. While 29% of retailers report that they are likely to need fewer store roles, 28% predict that there will also be a reduced need for office-based roles.
Other approaches to managing employment costs include holding back benefits, bonuses and other incentives (41%), increasing automation (40%), delaying wage increases (36%) and changing contractual hours (20%).
The resilience of stores
Drilling down into the bones of the TLT report reveals that while there has been a large-scale shift to online retail, physical stores remain an essential part of the multi-channel retail mix.
While most retailers were already putting in place strategies to build their online presence and capacity, the pandemic has brought urgency to this process, grocers being a prime example with 80% placing considerably more emphasis on online sales as people stayed at home. However, the appetite for physical retail remain with “80% of retailers saying their stores are becoming just, as if not more, important to their business”.
The report continues: “This echoes the 82% that said this in our research before the pandemic. While some businesses are closing stores, the numbers do not appear to be as high as many were projecting. Sixteen per cent of retailers are planning to close some of their stores, with the figures highest for fashion (21%) and grocery (20%) then home (14%) and lifestyle (10%). An equal number of fashion (21%) and grocery (20%) businesses are choosing to repurpose some of their existing store space.”
Meanwhile, the TLT data points out that while the pandemic may not be leading to excessive store closures, it is certainly forcing many retailers to re-examine their current leasing agreements. 
“Movement towards turnover rents and pandemic relief clauses are being explored and the negotiating environment is heavily influenced by the impact of CVA and administrations on previous leasing norms.”
This also means that, in some instances, relationships between tenants and landlords have come under increased strain as a result of the economic disruption of Covid-19.
According to the report, many retailers are looking to relocate stores to different locations, particularly those that have prioritised city centres over smaller high streets where footfall has increased as a result of lockdowns and the rise of homeworking. Nearly half (47%) of fashion, 39% of lifestyle, 33% of home and 20% of grocery retailers say they need stores in new locations as a result of the pandemic.
Multi-channel integration
Clearly, the Covid-19 pandemic has forced retailers, particularly those in the non-grocery sector, to employ a range of creative solutions to maintain trade. As part of accelerated transformation and restructuring, 77% are working on creating closer integration of their online and offline presences – this is a top strategic priority for fashion (82%), grocery (80%), home (76%) and lifestyle (71%).
Others, meanwhile, are seeking to be smarter use in the way they use the stores and assets they have. According to the TLT report, that could be considering bigger stores; hub and spoke distribution models; enhanced click and collect; and out-of-town locations with more space and parking.
Interestingly, only 13% of the top 100 UK retailers are currently rewarding their in-store employees for sales made online as well as in-store. This indicates that stores are still predominantly seen as purely a sales channel, and that retailers are not fully exploring less traditional ways of using this space, as Jervis points out.
“The changing use of stores and shift towards true multi-channel retailing is happening, and has been accelerated by the pandemic,” he says. “This requires a fundamental change in infrastructure, but it needs to happen quickly. The current environment is very uncertain for retailers. However, they need to make these bold decisions to change many established patterns of working, and more closely integrate customer touch points to take advantage of every opportunity to make a sale.”
Pointing out that retail is an essential part of the UK economy, he reiterates that retailers must focus on building a strong business that can not only survive in the current climate, but one that is prepared for life after the pandemic.
You can download the report and find further discussions about the data on TLT’s Retail Agility campaign hub, or to contact Perran Jervis, email Perran.Jervis@TLTsolicitors.com or call +44 (0)7766 548 791
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