Post Lockdown – What are our predictions for the future?

It’s the end of the (old) world as we know it (and I feel fine) 

Now I have finished with my review of how businesses and individuals have been coping, (Click to read Part One and Part Two of the New Normal) I thought I would conclude the final part with some predictions:

  • Too many people, too few jobs – I do believe that we will start to see an increase in the announcement of redundancies as the Government looks to end the Job Retention Scheme.  Once businesses start to incur the significant costs of staff and premises it really does depend on how their revenues recover post lockdown as to whether they can maintain their pre-covid employment levels.  We are already seeing some businesses (including those owned by Gordon Ramsay) using the Job Retention Scheme funding to pay people through their redundancy notice. 
  • Head Office/Home Office balance – This isolation has proved that a lot of people can successfully work from home and businesses are still able to function.  Offices will need to be repurposed in order to cater for reduced employment densities (most offices are now aiming to operate at 20-25% capacity immediately after lockdown easing) and the way we interact with them will change.  Some businesses have already made the decision to not open their offices until 2021.  Most of us will still desire that face-to-face interaction and collaboration with our colleagues, albeit, on a less frequent basis. 
  • Hours to suit – Flexi-time will see a resurgence. Most businesses will need to show willing to enable their staff to commute with minimal exposure at peak times on public transport. The authorities and environmentalists would like to see everyone walk/cycle to work (participation will inevitably be higher during the nice weather) but where public transport is the only practical mode it will mean flexible start and finish times to minimise peak travel. 
  • Digital dominance – We will all emerge from lockdown with new abilities for the digital age – particularly around remote working and video communication.  I feel that this will help diminish the need for some physical face-to-face contact in order to get business done.  It will mean greater scrutiny and justification of travel, particularly with use of public transport.  There will also be an emergence of new rising stars within businesses who have a natural flair for engaging in the digital world – some skills may translate from the physical world, other competencies will be discovered or developed. 
  • Home delivery and online will rise sharper than recent historic growth levels – The grocery sector has seen phenomenal growth in demand for online services in the last few months, to the extent that they have been unable to fulfil all the potential. I believe this will continue as more capacity is added and the crisis proves to be the trigger that forces a step-change in people’s behaviour, with more preferring to have their regular groceries delivered, to the detriment of the environmental considerations. 
  • People will shop local and support their independents – The successful independents have been very good at adapting their offer in the crisis and really engaging in support of their local customers.  I believe there will be a lot more emphasis that people put on supporting these independent businesses and shopping local. 
  • Retail Phoenix from the flames – There will always be a physical retail/leisure/F&B sector in the UK but there will be some clear winners and losers that emerge.  Some businesses will be rendered flightless (excuse the analogy) and be left to wither in the embers, struggling with business models that are unsustainable moving forward. Other businesses will adapt and survive.  
  • The death of retail browsing? The old ‘retail therapy’ rule book will need to be ripped up. Conversion rates should increase as people make visits with a clear purpose, and average basket sizes will increase as shopper frequency will be down and customers will be unable to try before they buy (due to the changing rooms being unavailable). This will result in an increase in returns and in the challenge retailers face on getting this returned stock sold.  
  • Retail Property is broken, and it needs Landlords and tenants to fix it – Both parties need to share the pain out of the current crisis. There has to be a recognition that Landlords still have bills to pay and so withholding rent for an extended period of time may not be acceptable.  This crisis will drive a fundamental re-correction in retail rents in order to take account of the new function of retail and ongoing rental sustainability.  There also needs to be a drive for more flexible leases where both parties share in the upside but share the pain of depressed performance.
  • Staycation havoc – With businesses encouraging staff to take holiday, people wanting a change of scenery from their home, and continued uncertainty on the opening up of international borders (and who will be around to take us to foreign climes) this can only mean that everyone will be holidaying in this country in 2020.  My advice, particularly if you have children, is to get your October half term and Xmas trips booked as soon as possible as prices are likely to go through the roof. 
Have you planned your staycation?
  • We will be better prepared for next time – This may be a once in a lifetime event (or longer) but be sure that UK plc will need to become a little more self-sufficient in certain areas – particularly with regards necessary medical supplies.  Who is to say that some forms of manufacturing won’t come back to our shores?
  • It will be an employers’ market – to a certain degree.  With too many candidates chasing too few roles the big challenge will be efficiently filtering applications.  This is where, as a recruiter, we can do our big value add to hiring managers and HR teams.   This will also mean that candidates will have to be more on point throughout the process than they have ever been, from their CV and covering letter, to interview skills – again, something we are well placed to support.  

Give us a call on +44(0)7918 653 877 / +44(0)7979 756 257 or email info@redtigerconsulting.co.uk if you would like to talk about finding talented individuals wishing to consider a fresh challenge to join your team.

Image: Photo by Mark Arron Smith from Pexels

The move to Bricks and Mortar

Last week, Amazon announced their ambitious plans to expand the “Go” convenience format, with its infamous “just walk out” technology, to 3,000 stores across the US by 2021. This is in addition to the numerous book stores, Amazon Fresh pick up locations, and this week Amazon 4 Star in New York. But it isn’t just Amazon, lots of pure play ecommerce retailers are experimenting and rapidly expanding their physical footprint.

This may seem counterintuitive given the amount of store closures, administrations and in the case of China abandoned projects. However as more legacy retailers either rationalise their portfolios or close completely it is freeing up prime real estate opportunities for ecommerce retailers to showcase their brands in some of the worlds global cities and deliver a customer experience which cannot exclusively be achieved online.

So is physical retail dead?

Most retailers are not simply closing stores because physical retail is dead it is primarily down to a lack of modernisation of their proposition and customer experience. These spaces are just no longer as attractive places to visit as they once were. In the UK you could blame the well-publicised occupancy headwinds of high rents and business rates, which have certainly played their part.  In the US, New York aside, these headwinds are not the same however closures are occurring at an even faster rate. Over 150 million sq. ft of space was lost in the US in 2017. Despite Amazon controlling nearly 50% of the US ecommerce market bricks and mortar is still estimated to account for 80% of US retail sales in 2020 according to McKinsey & Company.

What are the benefits of having a physical presence?

Bricks and mortar stores have the potential to become a seamless part of your supply chain. Small shops act as mini fulfilment centres where retailers can cut their logistics costs and service a set geography better. They also help to resolve some of the inefficiencies in servicing the last mile.  Away from logistics they provide an additional platform to showcase your brand, push membership and subscription services, highlight a curated selection of products and in some cases are multi-functional spaces depending on the time of day with VIP events, music and hospitality.  Physical space is also easier to individualise and personalise than a webpage or app. They can provide customer insight and behaviours that you may not be able to observe from all the big data and algorithms built from an online platform.   The volume of established retailers and starts ups now selling online is increasing exponentially, therefore physical stores help you to get noticed and stand out from the crowd.

Observations from the UK, US and China

The scale of physical stores being opened by ecommerce retailers varies dramatically depending on which market you are in. In the UK it has started with pop up stores rather than signing longer lease terms and is very much in its infancy. Some online clothing retailers have opened physical stores only to quickly retract.  In the US there is more of a commitment but with very favourable terms as landlords compete with one another in the fight to rejuvenate their centres. Warby Parker (eyewear), now boasts 85 stores and has been extremely selective in selecting the best lifestyle centre in each market it has opened in.

In China expansion is more aggressive. This reflects the very different evolution of retail. Like the US and UK, China has an abundance of excess retail space in more affluent coastal areas. This is primarily down to overdevelopment and anticipation of the growth of physical retail which never came to fruition. Many interior provinces remain underserved by physical retail and ecommerce has plugged that gap. Alibaba has been more aggressive than Amazon in its domestic market. Last year it acquired property owner Intime Retail (32 department stores & 30 shopping malls). Alibaba has significant shareholdings in electronics retailer Sunning as well as supermarket retailers Llanhua and Sun Art who have thousands of supermarkets between them. It has also grown organically opening the Hema supermarket chain, with over 60 stores to date and technology similar to Amazon Go.

It’s fair to say that physical retail is undergoing a major reinvention and traditional ecommerce retailers will play a part in shaping their future. Whether these operators need the physical footprint of a pure bricks and mortar retailer only time will tell. A chain of 3,000 Amazon Go convenience stores in the US is still quite small versus nearly 8,000 Seven Elevens.

The Death of Bricks and Mortar Retail

Coming from an analyst background, and now being a recruiter, I have worked a lot on location planning projects through the years. It is with a sense of sadness that I write this piece about possibly another nail in the coffin for high street retail, based on a recent experience of mine.

Trying out shopping on the high street

Earlier this year, on my birthday, my wife kindly decided to take myself and our daughters to Manchester for a bit of retail therapy (mainly for me but Mrs H somehow ended up with yet another coat to add to her collection) and out for a birthday meal.

I needed some new shoes and I had seen an advert for a particular brand on the tube a few months earlier – the brand are renowned for comfort (I like to walk a lot when I head down to London) but not for style, however they seem to have improved the latter! This brand has a store in Manchester city centre so my youngest and I set of to the shop, so I could try some shoes on, whilst Mrs H headed to M&S for an(other) emergency coat.

The benefit was being able to try on several different styles before deciding on a pair, that were incidentally not advertised on the tube.  I also got 10% off (that I could have used online) and also a great offer on 3 different products they recommend for the shoes (I usually resist this part).  We then had a fantastic meal at Gusto, where we were joined by the eldest daughter bearing a lovely Birthday cake she had made, before setting off home all happy and full of our Manchester City centre experience.

What happens when the purchase is faulty?

A week or so later, after having worn the shoes which were really comfy, nice style and I was very happy with, I decided to try the 3 products I was sold – a foam cleaner, a cream and a waterproof spray (In that order, leaving 30 mins between each application).  On the final product, to my horror, blotches started to appear on each shoe which could not be removed – they were ruined!

Obviously I phoned customer services to complain.  After the Danish phone advisor initially being very helpful,  he then went on to say, “oh sorry we only deal with online sales please contact the branch you bought the shoes from”.  I don’t head to Manchester that often, so this already started to sound like a pain.  The next step was to therefore email the shop, before calling and  speaking to the manager who said I needed to come in person with the shoes to either exchange or refund.  I have to add that by now I had thrown out my previous pair of shoes, so this could now be even more of a problem.

Online shopping would have been easier

To cut this long blog short – I managed to eventually get the shoes back but this involved sending my wife and eldest daughter to the shop in Manchester with the offending shoes, (a dangerous prospect sending the wife out to shop), to exchange for another pair.

This is supposedly the same company that also offer free postage and free returns with internet purchases, which turned out to be a much easier way to shop. I tried this service out by ordering my father some greatly reduced golf shoes – 3 pairs in different sizes, which was great for my Dad as he doesn’t take kindly to shopping.  He then had a couple of days to try the different sizes on and  chose which ones to keep, and which to send back (Which I conveniently did via a bargain booze outlet near me).

Retailers need to get on board with integrated online options

As they say “hindsight is a wonderful thing”, and if I had my time again on this episode, I would have tried the shoes on in the shop, as I was in Manchester anyway, and then ordered online.  This experience shows some of the key challenges retailers are now facing given consumers willingness to order online.  The whole experience I had was so disjointed, what they should enable is for me to purchase in store but also to then send back for free if required. A fairly simple process change surely.

It’s all about convenience and this whole experience inconvenienced me.  Retailers and location planners should not fear online shopping but embrace it for the improvement of the overall shopping experience.

If you see me in London, or Manchester, or wherever, please admire the shoes – they took a lot of blood, sweat and tears to get!