Back to school, back to business
With more office workers returning to work, London’s West End saw an increase in footfall of 10%. The Government’s Eat-Out-to-Help-Out scheme proved itself flavour of the month, being claimed on 64 million meals in its first three weeks. In its final week, it increased retail footfall by 6%. Shopping centres performed most strongly with a rise of 9.1%. However, despite this, figures were still 26.1% lower across the board when compared to last year.
Notwithstanding the success and widespread adoption of the Eat-Out-to-Help-Out Scheme, including M&S which opened 102 cafes, the Chancellor, Rishi Sunak, confirmed that there is no plan to extend it into September. Despite this, numerous restaurants have decided to continue the scheme out of their own pocket.
The UK officially entered into the largest recession on record, with the pandemic shrinking the economy by 20.4% between April and June 2020. In August, however, most retailers were back to business with sales returning to pre-pandemic levels; including up to a 3% increase in some sectors. For instance, Mango is set to improve upon its 2019 sales thanks to impressive digital sales growth and strong recoveries in some of its key markets.
Many companies across the fashion and household sales sector continue to struggle. Fraser Group’s chief, Mike Ashley, wrote to the Prime Minister to warn that there will be disastrous consequences for jobs in the industry if ‘crippling’ business rates are not reformed. The letter highlighted that thousands of job cuts at retailers, such as M&S and John Lewis, had already been announced in recent weeks.
With the furlough scheme due to end completely in October, a survey of 2,000 businesses showed that one in three expect to make redundancies by October. The Centre for Retail Research (CRR) revealed earlier this year that 24,348 jobs had been scrapped by UK retailers between January and June.
The Government has also confirmed that the final date for the Covid-19 retail grants would be 28 August. This was the cut-off date for any businesses affected and suffering due to Covid-19 to make a claim. The deadline came as many retailers have struggled to receive their grant funding due to delays in the system. £1.58 billion of the funds allocated for the grants have been reported as unspent and not yet distributed. Meanwhile, the separate Government backed ‘Bounce Back Loan Scheme’ introduced to support small retailers and other small businesses has topped £35 billion.
As certain schemes come to an end, a new potential venture between retailers, landlords and MPs shows promise, with discussions being held to lobby the Government to foot 50% of the commercial rent and services charges bill owed by businesses in the retail, hospitality and leisure sectors. These ‘Property Bounce Back’ grants will mainly focus on the businesses hit the hardest during the pandemic. Meanwhile, in the absence of a solution, BRC has requested an extension for retailer’s rent relief.
Throughout lockdown, whilst sales have been at record lows, many retailers have focused their attention on creating innovative and competitive initiatives. Amazon has just received the go-ahead to test autonomous drone deliveries, which means that packages can reach Amazon Prime Air customers within 30 minutes. This makes it just one of three companies to have received such approval from the Federal Aviation Authority.
Sustainability, being a constant growth platform, has been another key focus throughout lockdown. For example, plastic bag usage has dropped by 59% since 2019. Over the past year, grocers including Asda, Marks & Spencer, Morrison’s, Sainsbury’s, the Co-op, Tesco and Waitrose, sold 322 million fewer bags than in 2018-19. This is likely to drop even further with the plastic bag levy being doubled in April 2021 and extended to all retailers.
Wrangler has set itself a challenge of halving its water usage by 2030, as part of its ongoing sustainability efforts. In April, the company had saved over seven billion litres of water in the production of its denim products, which surpassed its 2020 goal by 1.5 billion litres.
There is also a growing awareness of the impact that fast fashion has on the planet. This has raised concerns that retailers, such as Topshop, H&M and Zara, will lose sales due to the public perception implications of the estimated 11,000 items sent to landfill in the UK each week. These risks to maintaining market-share are heightened as a result of the sector’s requirement for sustainable offerings and corporate transparency in recent years.
Meanwhile, Burberry has become the first luxury fashion brand to launch a collection of designer face masks for £90, donating 20% of the retail price of each mask to its Burberry Foundation Covid-19 Community Fund. The fund helps health care workers and individuals who have been negatively impacted by the pandemic. A number of smaller fashion brands have followed suit and introduced a not-for-profit face covering.
It is suspected that many UK consumers may be able and willing to purchase such luxury items, as shown by the rise in sales of Rolexes and other luxury watches – likely caused by the reduction in global travel and high-end leisure spending. The retailer, Watches of Switzerland, has published news of the increase in such sales and ultimately a jump of 20% in its share price.
Under the spotlight
Various retailers have been under the spotlight this month. The Arcadia Group, the parent company of Topshop, Evans and Burton, has been accused of offering redundancy settlements based on furlough pay and not on employees’ usual full salary. This comes as it is in the process of making 500 staff redundant.
Boohoo has become another frequent deer in the media’s headlights, as auditors found that 18 of its suppliers were paying less than the minimum wage. It is believed that, in some cases, workers were paid as little as £3 - £4 per hour. An independent investigation is underway, ordered by Boohoo itself, as the report led to £1.5 billion being wiped from its share price in two days.