How the crisis is polarising the retail market

5 min read

Retail & Wholesale

This is the first weekly update from Santander’s Retail & Wholesale team on how the Covid-19 pandemic is affecting our clients and the sector as a whole.

Wholesale

The impact of the Covid-19 pandemic on the UK’s wholesale and retail sector has so far been hugely polarised. Many businesses have seen sales soar to record levels as consumers have taken steps to stock up on essentials in anticipation of being stuck at home for weeks on end; others have been forced to shutter their operations for the foreseeable future due to government social-distancing and workplace-safety rules.

A new report from research consultancy Retail Economics has highlighted the effects the crisis has had on different subsectors. In food and drink retail, the surge in demand which started in March still shows little sign of falling back to normal levels. It is estimated that 25% of consumers have been stockpiling staple goods such as pasta, rice and flour.

Indeed, these businesses have faced a significant logistics challenge in keeping supply chains running at full capacity and getting stock onto shelves as quickly as possible. As a result, many supermarkets are looking to hire thousands of extra workers.

Some businesses in the hospitality sector have managed to adapt their operations to become mini-supermarkets, for example selling ready-meals and fresh produce on a click-and-collect or delivery basis. And many retailers are reworking their distribution centres to focus on grocery items at the expense of non-grocery lines.

The picture in fashion and clothing is dramatically different: high street sales have plummeted and most outlets have now been forced to close for the time being, with major sourcing markets such as Bangladesh are facing significant losses in export revenues. Some producers have switched to making personal protective equipment (PPE) for medical staff and others.

With many manufacturers, suppliers, logistic companies, platforms and brands considering what their rights and obligations are in the context of the pandemic, the UK Fashion and Textile Association (UKFT) has set out some of the legal issues around Covid-19 here. This follows the news that the Urban Outfitters chain had written to suppliers to say it could no longer accept delivery of goods on purchase orders, citing force majeure.

Meanwhile, ecommerce firms could be set to benefit from consumers’ increased willingness to shop online in future: Retail Economics says that almost two-thirds (64%) plan to make digital purchases rather than those at physical locations if the virus persists. Accordingly, we are seeing businesses in this sector begin to ramp up their expansion plans.

  • Benchmarking with the BRC: The British Retail Consortium is providing ongoing updates on the steps being taken by major UK firms in response to the pandemic. This can prove a particularly useful tool to help businesses assess and benchmark their own strategies.
  • Implementing government advice: The BRC has also produced a guide for warehousing and distribution businesses on how to adapt their operations in accordance with government advice on social distancing and employee absences.

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