Modern Retail

The State of UK Retail: March 2021

State of UK retail

The government announced ‘the roadmap’ out of lockdown and restrictions last month and this month we had The Budget – many of the announcements obviously impact the retail industry.

What do we know so far? 

What have we learnt? We know that non-essential retail is due to reopen on April 12, providing the data indicators allow. The timeline has been devised to come out of lockdown and restrictions gradually and although some retailers are frustrated they have missed Valentine’s Day, Mother’s Day and Easter – many retailers are happy with the timeline, especially if this means a final return to normality for the industry. 

A £6,000 grant for non-essential retailers to help them reopen was announced in this month’s Budget for England, and they’ll also be getting relief on their business rates until June with a further 75% discount after that. In Scotland, they’ll receive a 12-month rates holiday.

There’s also been the extension of the furlough scheme until September, which will be helpful to retailers if they don’t know exactly how many staff they’re going to need, once their physical stores can reopen.

There’s a proposal, yet to be confirmed, around tax on online sales – this is around the big retail names who infamously do not pay their full corporation tax. However, the hope is this won’t affect smaller businesses and be benchmarked only for companies with a certain turnover. If there was a blanket online sales tax that would be very harsh for all the independent retailers that have pivoted to online during the lockdowns when they’ve been unable to open and trade from their physical stores.

What do we know about retail sales in 2021? 

In January sales dropped by 8.2% compared to the December 2020 sales. This was a significant drop in retail spending and well below the analysts forecast, which was to have a 3% decline between December and January. In particular clothing was really hard hit – sales dropped by 35.6%. 

It’s been a really tough start to the year for retail in general. 

What do we know about online sales?

With the major shift to online sales, most recent figures from the Office of National Statistics – in January 2020 around 19.5% were online sales, in January 2021 this leapt to around 35%. We know this is largely due to non-essential physical retail being ‘closed’ for much of the pandemic but it’s still staggering figures. Ecommerce began around 1995, it took 25 years to go from 0% of all retail spend to 19%. Then in one year it’s gone from 19% to 35%! 

Let’s not forget Brexit

Brexit came into being at the end of the transition period, the beginning of January. There was very little time for retailers to prepare and it’s still very unclear for a lot of businesses who ship to the EU, they’re struggling with how to ship to customers without the customers ending up with a major charge at the end of it. Several people have just switched off their EU shipping because of the complexities. 

Whatever your political view – it is impacting EU trade. If you’re ordering from overseas, there’s actually no way of telling exactly what your charges will be before the goods are arriving in the country.

The government did announce a grant to help cover costs, if you’re a small business you should investigate the Small Business Grant to help pay for advice and any paperwork or setup that’s needed to help you deal with Brexit. 

So in 2021 so far there’s been a certain amount of relief announced, non-essential retail is due to reopen on the 12th of April but the start of the year has been disappointing in terms of spending and BREXIT has finally happened.

What will happen next?

The pandemic has had a huge economic impact and the question all retailers are asking is ‘do you think people are just going to stop spending’? As the furlough schemes come to an end will there be a real drop off in consumer spending?

Andrew Bailey, the governor of the Bank of England has said there’s actually quite a lot of evidence and information that would suggest we’re going to see pretty strong consumer spending for the rest of 2021. We know that there’s been a huge disparity in how people have been hit by the pandemic, many people have been left struggling to pay the bills but many who have seen their everyday expenses massively decrease during the pandemic because they’re not going on holiday, going out, eating out, going to the hairdresser’s – so there is money to be spent.

Feeling optimistic

We don’t know what will happen when retailers open their doors again on the 12th April but I’m feeling optimistic. I would say to physical retailers – don’t forget that your digital presence is still one of your best tools even once you reopened. When you’re messaging people about coming to the physical store – share what’s in store, on your website, on your social media, give them updated information about your new products so that they know what to expect and they have a reason to come and see you. Use those digital channels that you’ve had to rely on during the pandemic to drive people into your stores. 

The kind of customer that interacts with you in your physical space as well as your online space are going to be your most loyal customers.

Subscribe to Modern Retail's Weekly Newsletter

Catherine Erdly

Catherine Erdly has over 20 years experience working with product businesses of all sizes from high street names (such as Paperchase, Laura Ashley, and Coast), to some of the most exciting new independent businesses. She helps product businesses grow their sales, manage their stock, and build lasting businesses through 1-2-1 mentoring and her membership The Resilient Retail Club.