Last year was a significantly tough year for businesses across an array of industries, with factors such as coronavirus and the subsequent lockdown measures compounding the underlying challenges created by Brexit.
This has created a bleak economic outlook that’s being perpetuated by the government’s recent decision to delay the cessation of remaining lockdown measures for another month or so, with retail businesses particularly hard hit.
But how is the current retail climate looking, and what steps can owners take to safeguard their interests going forward.
The death of the high street and other retail challenges
Even prior to the coronavirus pandemic, economists were bemoaning the so-called “death of the high street” in the UK as a number of prominent brands went order and huge swathes of corporeal shop space went used.
This issue has definitely been compounded by the EU referendum vote, with nearly 80% of all food imported by UK retailers coming directly from the EU. What’s more, the majority of this trade comes through Dover and Folkestone, creating potential bottlenecks and customs requirements becoming increasingly costly and complex.
We’ve also seen considerable complication surrounding the Northern Ireland Protocol, which has been threatened by the Brexit deal and is making it hard for NI retailers to import UK produce (particularly chilled meat) into their stores.
Overall, the increased cost and lengthened delivery times caused by Brexit could be devastating for retailers, with textiles and clothing firms likely to see their operational costs rise by around 15% overall.
These will mount over time, of course, and it’s important to note that duty rates on imports from outside the EU will be largely unaffected in the meantime.
The impact of lockdown
In March 2020, the UK government opted to shut down as the coronavirus pandemic rampaged throughout the country, with British retail sales plummeting by a record amount in April.
As stores were required to temporarily close their doors, the Office for National Statistics (ONS) said that the amount of goods sold fell by 18.1% during this period, while clothing sales halved in store.
The situation has barely improved since, with the recent months punctuated by two more national lockdowns that have caused some stores to close their doors permanently.
Certainly, corporeal sales have fluctuated over the course of the last 15 months, while it has been difficult for retailers to plan for any kind of medium or long-term future.
How can retailers plan for the future?
Interestingly, multi-channel operators were less impacted by lockdown, with the coronavirus pandemic actually adding approximately £5.3 billion to the ecommerce sector in the UK.
This was because customers turned online to satisfy their shopping needs during lockdown, so retailers who were able to meet these requirements and transition online fared far better than others.
This is a key lesson for brands to heed, as there’s a pressing need to create a flexible retail model and make long-term plans to gradually transition their business online.
Another important step for retailers and entrepreneurs within the sector is to consider the global financial markets, with investment vehicles such as futures trading providing particular value.
According to Duncan Anderson, the CEO at Tickmill, “this vehicle provides the value element to any existing investment portfolio, allowing for increased leverage and creating some much-needed flexibility.”
From a retailer’s perspective, this can also ensure that key imports (such as cotton and wool for textile brands) remain at a set price for the duration of the contract’s term so there’s a slim chance these materials will climb in price if a futures contract is in place.
Retailers need to ensure that they’re able to change with the continuously changing circumstances and if they are able to, then it is forecast that retail is expected to climb significantly in sales compared to 2020.