Across the supply chain, retail has been hit hard by the coronavirus pandemic. Lockdowns saw bricks-and-mortar outlets particularly badly impacted, as the majority were forced to close for several months, while social distancing and order cancellations caused challenges to suppliers and prompted widespread issues for cashflow.
However, technology has become a key enabler for many businesses. The shift to ecommerce has seen many businesses open online stores for the first time, with leading providers such as Shopify seeing an upsurge in business. But other online channels have also seen growth. Customer engagement tools have been embraced by many businesses, with smaller outlets embracing technologies such as WhatsApp for Business and new features on social media platforms including Instagram.
For consumers, purchasing has evolved with the state of the pandemic, with an initial surge in food produce giving way to hobbies and leisure. However, ecommerce's popularity is expected to remain long after lockdown ends.
Offline vs Online: Covid-19 contracts retail markets
Overall, global projections for retail have been downgraded as a result of Covid-19, but worst hit is bricks-and-mortar retail. Ecommerce, however, has seen adoption increase, prompting a rise in near-term expected market value, but not enough to counter the overall downscaling of projections.
Global retail market value projections in million USD: Pre and post Covid-19
Loser case study: Primark
The fast fashion giant Primark has become a lesson in the importance of digital resilience in 2020 after losing £800m as its profits dropped by two-thirds.
The reason for this is that Primark, renowned for its low-cost clothing and homeware, had virtually no online presence beyond a basic website and social media channel, with no ecommerce offering at all. This meant that when lockdown hit the UK it had to close all of its stores and furlough 68,000 staff, reducing its profits in the country to 0 for the period.
The retailer has now reopened and has expanded its online presence to allow shoppers to browse products online, however it is still not possible to purchase products online, and footfall remains lower than pre-Covid-19.
Winner case study: ASOS
Fashion ecommerce giant ASOS saw a dramatic change in buying habits, with a shift to casual and sportswear, but effectively rode the wave to deliver a 19% increase in global retail sales and a 329% increase in before-tax profits.
However, it saw consumers shift to more deliberate purchasing after the initial shock of lockdown, which prompted slower order growth recovery and produced a stark difference between gross and net sales.
ASOS UK KPI Covid-19 case study
Subscription models: Providing retail resilience
One area of retail that has enjoyed above-average performance is subscription models. According to Zuora, 50% of businesses that use this model, which typically sees goods posted to customers on a regular basis for a fixed price, have continued to grow as normal amid the pandemic. 18% have also seen the rate of subscribers increase during the period.
“Getting ahead of the game and tapping into the subscription economy now will not only help organisations to bounce back following the global pandemic,” said John Phillips, general manager at Zuora. “It could also boost an organisation’s profitability further down the line.”
Completed retail deals in 2020
Worldwide mergers and acquisitions have seen a stark drop-off in the retail space in 2020 compared with 2019, with little sign of recovery so far as we move into Q4. However, 2021 may bring some renewed activity as companies seek to pivot in response to the changing operational environment.
Worldwide retail mergers and acquisitions: 2020 versus 2019
GlobalData expects the retail industry to be deeply affected by the recession and although the bottom is predicted to be short, the recovery will be drawn out.
Businesses are advised to accelerate investment in digital transformation across their organisations, and to closely monitor and respond to changes in consumer behaviour.
In the longer term, businesses that develop products better suited to changed consumer attitudes are expected to thrive, as are those that build resilience to future incidents and adopt low-capital operating models.
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