This article was originally written for Essential Retail.
In the days post the Brexit vote, many people are wondering what will happen to our way of life and that includes our shopping patterns. Clearly the uncertainty and negative response of the financial markets has made everyone jittery and we may see a return to the 2008 financial crisis cash saving mentality for retail consumers. But, even before the vote on the 23rd of June, our retail clients were reporting soft sales in their brick and mortar stores in the UK. Some commentators were even suggesting that the high street is a thing of the past – and that ecommerce is the only way for retailers to thrive.
Indeed Brexit, with both its immediate effects and its uncertain long-term impact, could not have come at a worse time for brick and mortar retailers who were already surviving on razor thin margins. The situation is further complicated for those UK-based fashion retailers who buy a significant amount of goods overseas and pay in U.S. Dollars, meaning that their buying power will be reduced by the falling value of Sterling against the U.S. Dollar. Questions exist as well about the availability of workers for retail stores, distribution centres and customer service centres based in the UK if we see any immediate restrictions imposed on the free movement of people.
Whether the loss of sales retailers make in their stores can be recovered by increased online sales remains to be seen. Certainly, our clients have reported that online was weathering the pre-vote storm better than in-store sales, but it is probably too early to gauge the reaction to shopping online or via mobile apps in our post-Brexit world at this point.
As some commentators attempting to find some humour in the situation have pointed out, we don’t really even know if we will be facing a true Br-exit, or more of a Br-atus-quo or Br-omiostasis. But, 2016 had already promised to be a tough year for retail and the current uncertainty about the coming political and social changes from Brexit combined with weakness in our currency cannot help. According to a recent report by Colliers International (pre-Brexit vote), 10 million square feet of new-build shopping centres and expansions to existing shopping malls which had been scheduled to be built in the next three years will now not be completed. We anticipate further announcements along the same lines as developers take a more wary position on UK projects and retailers re-evaluate their store portfolios before committing to any new shop openings.