Shopping trips have transformed from an opportunity for consumers to indulge themselves into mission-driven trips for purchasing essential items only; socialising in cafes and restaurants – when permitted – has meant mixing with smaller groups or with members of the same household; and live events and life celebrations have all but disappeared off the landscape altogether.
Yet consumers have shown themselves to be resilient in getting out and about again when restrictions permit. Springboard data reported rises in retail footfall of more than 40% in the week immediately following the easing of restrictions after the first two lockdowns, suggesting consumers are keen to return to a ‘new normal’ as soon as it’s possible.
Graeme Payne, partner and head of Bird & Bird’s international Retail and Consumer group, is optimistic about the future of the industry. “I believe there is a huge pent-up demand for what retail, food and beverage and hospitality provide. It won’t be a temporary blip, all of those activities we haven’t been able to do will bounce back even if they are in slightly different environments.”
What consumers will find when they return to retail, hospitality and other consumer-facing settings are businesses that have been through a tumultuous year, but one that has demanded reinvention.
In a survey of 400 senior businesses in London and the South East by Opinium in partnership with Bird & Bird, seven in ten (68%) say that the pandemic has made their business more innovative.
Three fifths (61%) of London businesses say that they have diversified and adapted their offer as a result of the pandemic, with nine in ten planning to continue with the changes going forward.
Will shopping habits adopted during lockdowns stick? And how will consumer-facing businesses adapt to the future consumer landscape?
Online shopping and digital content have been the big consumer winners of the pandemic. From the very start of the first national lockdown, consumers were compelled to shop online, with some demographics and consumers making their first-ever digital shopping journeys.
Retailer John Lewis noted in December that online shopping accounted for between 60 and 70% of its sales, compared to 40% in March last year when the first national lockdown started.
Over the course of the pandemic, businesses dependent on physical interaction and those behind in digital transformation have suffered the most. Whereas those that were able to meet consumer needs digitally, or via delivery, have been able to flourish.
“The pandemic has accelerated the growth of direct-to-consumer businesses and likewise accelerated the decline of those businesses that were already suffering pre-pandemic,” says Payne. “Food delivery businesses such as Gousto, HelloFresh and Mindful Chef have all done incredibly well.”
Less so, high-profile retailers including Topshop and Debenhams whose pre-pandemic struggles put them in a weak position to survive a crisis.
“The example of online fashion retailer Boohoo – founded in 2006 – buying the centuries-old Debenhams retail brand (but not its stores) sums up what’s been happening on the high street and accelerated by the pandemic” adds Payne.
Phil Sherrell, partner and head of Bird & Bird’s international Media, Entertainment and Sport group, says businesses in the sector were mostly well-placed to weather the pandemic storm, not least because they were forced to adapt to digital some time ago.
“When we moved to a virtual world in March last year, the content-delivery model was already there so those businesses have been quite resilient. In many ways, they’ve benefited from the increase of ‘static leisure time’ compared to ‘mobile leisure time’.
Yet for parts of the sector dependent on physical interaction and having lots of people or fans in venues – theatre, music, sport – it’s been a whole different story.”
Phil Sherrell, partner at Bird & Bird
The most visible change for consumers in London in the next phase of the pandemic will be empty stores.
Retail casualties are mounting, and businesses are rethinking their physical presence.
businesses in London
Seven in ten (69%) businesses in London say that they have already reduced or will reduce their footprint as they renegotiate rental agreements, rising to three quarters (75%) of businesses with more than 250 employees.
A quarter (24%) say that they have already done this, while half (51%) expect to do so within the next six months. More than 95% said these changes are a result of the pandemic, with 44% saying this is entirely down to the pandemic.
Prime locations in London are likely to suffer most in the aftermath of the pandemic. The New West End company, which represents businesses in central London, says one fifth of the 264 stores on Oxford Street are now boarded up. More retailers are poised to depart.
David Dalziel, creative director of brand innovation studio Dalziel & Pow, says: “Unlike after the crash in 2008, there is no raft of newcomers to take the place of failing brands in the prime locations. In the past we’ve seen a wave of European and American brands take up big spaces in key locations, even in tough times, but they are no longer there.”
Dalziel says multi-floored, big box retail in the centres of town could well disappear. “In a space like Debenhams on Oxford Street, it might be possible to segment and re-sell the ground, first and basement, but six floors of trading may be a thing of the past.”
In their place, landlords will be looking at new models and new occupants to regenerate empty spaces, potentially combinations of residential and leisure to bring people back to the centre.
For the consumer, this could create a fundamentally different offer on the high street in the form of new retail, leisure and dining concepts.
“Repurposing the high street is definitely being thought about by us and our clients in terms of what will happen because of the sudden appearance of available real estate,” says Payne.
The relationship between tenant and landlord now favours the tenant – a power shift already underway since before the pandemic.
“A number of our food and beverage clients looking at growth in the next two years have been able to achieve landlord deals in the past few years that they wouldn’t have been able to before.”
“Even as some of the casual dining concepts pass, new concepts will emerge. We’ve seen vegetarian and vegan concepts that partly fill the gap and established players also developing their vegetarian concepts because of consumer demand,”
Graeme Payne, partner at Bird & Bird
Whereas central London and specifically the City of London, with low residential rates, have seen their daily working populations decline, local high streets around the city have flourished when they have been legally allowed to open.
“The resurgence of local shopping is possibly the biggest impact of the pandemic to retail in the capital,” says Dalziel. “Hopefully this will continue into the future as we shop more frequently and more local with trades from hardware stores to florists, greengrocers to bookstores.”
Alongside reinvigorated independents, the local outlets of bigger retailers could also become important points of contact for consumers shopping online.
“Large footprint stores are being shunned in favour of localised experiences that run in tandem with digital channels,” says Andrew Howell, global marketing director for K3, a technology firm specialised in queue-beating solutions.
“For example, we will soon see instances where customers order products to their nearest store, try them on, and only pay for the items they want to keep then and there. This means retailers won’t have to process returns and it also removes a huge pain point in the buying process as consumers aren’t wasting their time and money dealing with returns either.”
Once consumers are out and about again, the hand sanitising stations, one-way systems, wearing of masks and social distancing rules we have become accustomed too over the past year will remain in place in the immediate future.
Eight in ten (79%) London retail and consumer businesses say that they are likely to maintain at least some levels of COVID-secure practices even after the pandemic-related restrictions are lifted – even though 96% expect there to be an ongoing cost for this.
Consumers’ appetite for such measures may vary by sector.
Payne says: “I can see such measures being maintained for the medium term and maybe returning in winters depending on how the health situation is managed.”
In the case of live events, such as music venues and sports stadiums, a long-term future of reduced capacity because of social distancing rules is simply not feasible.
Sherrell says: “The whole live event experience is built around close physical proximity to other people and models where you fit in as many people as possible to maximise revenues.
“If we remain in a world where some form of social distancing is still required, and capacity numbers are reduced, you have assets and grounds that will have to fundamentally rethink their business models,” he adds.
“You’ll also have consumers and fans who are not going to get the same experience and the adrenaline rush that’s a big part of a live event.”
Technology is set to play an ever-greater role in consumers’ lives going forward both upfront and behind-the-scenes, as businesses try to figure out which habits developed during the pandemic will stick.
People’s working schedules are likely to have the greatest impact on their lives after the pandemic.
For John Lewis, for example, the switch to working from home prompted a change in peak hours for online shopping. The previous peak of between 7pm and 10pm in the evening shifted into the working day between 11am and 4pm.
Nearly three quarters (72%) of consumer businesses in London say that they are already adjusting their business model to account for a change in peak times.
For London’s food and beverage businesses, accustomed to a battleground for commuters’ breakfast spend and to Thursday evenings being the biggest night out of the week, any changes to the working week will have a big impact.
“We’re all going to have to work out what the balance of a week looks like in terms of the commuter: how many days a week will the worker who formerly came into the capital four or five days a week now come? And what does that mean for the food and beverage industry?”
Graeme Payne, partner at Bird & Bird
Artificial intelligence technology will likely play an enhanced and key role in business planning and management, helping companies predict high consumer peaks, manage stocks, staff patterns and food waste.
Ultimately it will feed through to decisions on when a food and beverage business closes for the day and the type of offering available to consumers.
E-commerce has been a big winner from the pandemic. Going forward, it’s set to be an important battleground as retail businesses figure out how to make it profitable, how to lock in consumer spend, and how to meet emerging consumer needs.
“The demand has exposed many flaws in the online model,” says Dalziel. “Online is not as satisfying as consumers might have hoped, with varied levels of stock holdings, varied efficiency in deliveries and the very poor sustainability of the process in principle.”
As businesses try to win over consumers, discounts and new models of engagement will come to the fore.
Mo Karim, in-house counsel at retail start-up T0DAY, believes we could see a new wave of subscription offers. “Taking lessons from the technology sector, businesses with a retail presence could look to guarantee a stream of income. Free delivery subscriptions – already in place – could be packaged up with add-ons, such as exclusive access to events or even exclusive products.”
Another aspect of the pandemic that will have a big impact on consumers is the effect of the enforced pause on spending that came during lockdowns.
“The pandemic has changed a lot of people’s working lives and their behaviour as consumers,” says Payne. “They are more aware of their wants versus needs and have realised they don’t necessarily need to spend what they previously have done in the past. For example, those who commute, use public transport, get a coffee and spend £10-12 before they arrive in the office – that will change quite significantly.”
With consumers more focused on their real needs, their relationship with brands and how they choose to spend their time will change.
Erin Brookes, lead of the European Retail Practice for Alvarez & Marsal, expects the customer mindset to be one of greater consideration. “Consumers will consider what it is they really want to engage with going forward. For example, many are unlikely to reverse the new digital journeys they tried out – sometimes for the first time – during lockdowns.”
She adds: “Consumers will become more selective in how they spend their time, so we expect to see the pre-pandemic trend towards experience heightened. Mediocre customer journeys will be supplemented by technology and customer service that works – and it will be a lasting shift.”
Such shifts have been trending in consumer-facing businesses for several years, but the pandemic’s lasting impact is acceleration. What might otherwise have taken five years or more to become mainstream for consumers is now current, and very much part of the new normal.