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Effects of COVID-19 Within Retail Post-Brexit

retail

“The UK’s vote to leave the European Union (EU) could have far-reaching impacts for the UK retail industry. While recent data has shown that the impact of the UK’s decision to leave the EU to the UK retail industry has been more moderate than expected, it has come at a time when many retailers are trading on slim profits and declining sales as they get to know the new breed of consumer.” – Marsh.com

Prior to the Brexit conclusion, businesses developed numerous scenarios based on differing assumptions to the negotiations. There are projections that Brexit may bring more long-term damage and losses to UK retailers than COVID-19, so how can retailers prepare for both the pandemic and post-Brexit changes?

The sudden growth of e-commerce has resulted in manufacturers having to satisfy very different stock and supply requirements of Amazon to Asda; direct to consumer sales have created additional costs and operational pressure. Forecasting has become more of an educated guess than ever before as there is little to no history on which to base new assumptions. Different measures for success need to be developed as do cost and profit profiles by channel and product.

 

Retailers have now become innovative when adopting policies to deal with social distancing and better hygiene protocols. The Grocer tells us that Virtual Queuing has been introduced, on a trial basis at Sainsbury, Asda, the John Lewis Partnership and M&S. Customers select the store where they wish to shop. The app notifies them when they are at the ‘front’ of the line, without the need to physically queue.

Post-Brexit Graph for Adults Shopping

When rising Brexit-driven costs begin to make their way through the supply chain, along with an unsustainable squeeze on margins and profits, how can retailers implement a more strategic approach to pricing that keeps the focus on value and customer loyalty while delivering sustainable results?

Will people retain their home shopping habits Post-brexit?

Stores have felt more spacious because there are fewer shoppers in store and retailers making the aisles wider, uni-directional and by removing the freestanding displays. On shelves, there were fewer items. This latter point being driven by logistical and supply issues initially and then by the financial benefit of seeing more profit from less items on shelf. 

 

Retailers will find they are facing a significant challenge as their stores, supply lines, range policies and customer propositions all need to be adapted. There have been a disproportionate number of retailers close their doors over the last 6 months, online offers a significant solution and will enable retailers to:

Manufacturers and retailers are having to develop omni-channel strategies to not get left behind as the consumers are embracing this new norm. In addition, the closure of major high street chains and the move of the brands online will further reinforce this behaviour. Brexit may impact EU sourced supply chains and create new business in the UK.

 

Ultimately, the Chancellor of the Exchequer will have a significant impact depending on whether he stimulates enterprise or taxes society.  One will affect the cash available to spend by individual consumers (i.e. taxation) whereas the other will enable consumer spending to stimulate the economy and ultimately government revenues.

 

Consumer goods companies and retailers will need to re-evaluate their relationship and how the ecommerce side is balanced with the bricks and mortar in terms of both the margins/pricing by channel and the implications that manufacturers might supply bulk products direct to consumer e.g. laundry products. Having mature revenue management systems to support the key forecasting processes along with the mandate to change the business direction is crucial in allowing FMCG companies to be more flexible in adapting to the transforming and uncertain market post-brexit. 

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