12 April 2021: Retail Independence Day V3
COVID-19 Market Update – 26/02/2021
7 minutes to read
Introduction
This is the 33rd of a series of weekly notes analysing the state of the UK retail market in the light of the COVID-19 pandemic. This note explores two key themes:
- Retail reaction to the latest roadmap out of lockdown
- More polarized views in the hospitality sector
Please do not hesitate to contact myself or any of my retail colleagues if you require any further information.
Key Messages
• “Non-essential” retail poised to reopen from 12 Apr
• A week/fortnight later than many were anticipating
• Many “non essential” retailers deprived of Easter trading
• Easter 2nd busiest period of trade in retail calendar (after Xmas)
• Huge pent-up consumer demand will see spend rebound
• Footfall forecast to surge w-o-w +48% post 12 Apr
• Footfall predicted to be up +129% y-o-y
• Sharp rebound in spend, but slow retail market recovery
• Outdoor hospitality to reopen from 12 Apr also
• Indoor hospitality delayed until 17 May
• Unfair dividing line between those with/without outdoor space
• All restrictions potentially lifted by 21 Jun
• All eyes on the weather…
1. Retail reaction to the latest roadmap out of lockdown
Light at the end of the tunnel. But the tunnel itself is a little longer than maybe most in the retail sector were anticipating or hoping for. And above all else, this will be the last lockdown tunnel any of us will have to endure. A general summation of retail reaction to the government’s roadmap announcement at the beginning of this week.
In terms of dates (all provisional, of course): “non-essential” retail will re-open on 12 April. On the same date, pubs and restaurants will be able to serve customers in outdoor areas only, subject to the rule of six. On 17 May, indoor hospitality will re-open, again subject to the rule of six. And from 21 June, the plan is that all existing restrictions will be lifted, but it seems fair to assume that social-distancing and mask-wearing guidelines will remain in place beyond that.
Slightly mixed feelings to this within the retail sector. On the positive side, obvious relief that Lockdown V3 will finally be lifted and that there is a firm(ish) date to aim for. And, unlike the move to Tiers in December which was implemented at a moment’s notice, retailers have ample time to plan and prepare for re-opening.
On the negative side, perhaps they have too much time. The roadmap was announced on 22 February, the re-opening of “non-essential” retail will not occur until 12 April, a full seven weeks in the future. Seven weeks back was the first week of January, which marked the official start of lockdown V3. Depressing as it is to point out, we’re only halfway through the latest lockdown.
The consensus amongst retailers prior to the government’s announcement was that “non-essential” retail would open a week or even a couple of weeks earlier than is actually planned. And the key issue here is the timing of Easter, which this year falls on 4 April. “Non-essential” retail will now not open in time for Easter.
The importance of Easter in the annual retail calendar is often understated. But those of us that religiously track retail sales performance know how the timing of Easter massively distorts figures in March or April from one year to the next. It is easy to forget that Easter is actually the second biggest trading period after Christmas (if Christmas is to include Black Friday). Easter is far bigger for most retailers than more media-fixated things such as Halloween, Valentine’s Day and major sporting events, such as World Cups, Olympics etc.
Most sectors (food and non-food) receive a sales boost around Easter, to a greater or lesser degree. It is clearly prime time trading for DIY operators and they will obviously continue to reap the benefits of being classified as “essential” retailers and therefore open for trade, as, of course, will the supermarkets. But other “non-essential” operators will be deprived of their second busiest trading period of the year.
How will the retail market play out post 12 April? As with previous lockdowns, the pace of re-opening is likely to be staggered, although perhaps less so than previously. But again, will retailers open stores in every location if the footfall is not there and it is financially unviable to do so? Again, this raises question marks as to the rate of re-openings in major city centre openings, most notably Central London. These openings may again be de-prioritised until such a time as workplaces return to something like full capacity.
But expect a significant consumer bounce-back come 12 April. Springboard are forecasting that footfall will surge +47.9% week-on-week from 12 April, a seemingly massive +129% increase on the previous year. But that was clearly against a very weak Lockdown V1 comparable in 2020. And this will be the name of the game in assessing the health of the retail market for the rest of the year and beyond – don’t be seduced by big numbers, be mindful of the bigger picture.
Any gripes on timing aside, the roadmap out of lockdown is of course good news for the retail sector. And we firmly believe that the consumer is primed and ready to play their part, with both the money and inclination to spend it far outweighing any wider economic or confidence concerns. Retail spend will rebound quickly, but wider recovery in retail markets generally will be far more protracted, as the scars of 2020 inevitably take longer to heal.
2. More polarized views in the hospitality sector
The hospitality sector is perhaps even more complex. On the evidence of past lockdowns (and easing thereofs), the situation is either nuanced by ambiguous guidelines or complicated by arbitrary dividing lines. Lifting of Lockdown V3 appears destined to follow this trend.
Thankfully no geographic Tiers this time around, nor the nonsense of having to have a substantial meal with every visit to the pub (good as scotch eggs and pork pies are). But this time, there is the unhelpful time lag between the re-opening of outdoor and indoor hospitality and the dividing line / loopholes this will inevitably engender.
Of course, this is all being dressed up as us being able to have a drink with our friends/family in a beer garden from 12 April. All well and good, but what of pubs / restaurants that don’t have a substantial beer garden, probably the vast majority in city centre locations? Also, for those with a limited outdoor space, will it even be financially viable to trade with such limited capacity? For many, another five weeks of lost trade.
There is clearly understandable consternation amongst those hospitality operators that fall on the wrong side of the fence – particularly those that may have tried to secure requisite planning for outside space in the past, but have been refused. As we have seen during previous restrictions, I expect to see operators coming up with their own “creative solutions” come 12 April.
The single most important factor in a successful rebound in the hospitality sector is probably the weather. Economists may rubbish it as driver in either the retail or leisure market, but ask any operator in either sector and they will invariably cite the weather as the most influential factor on trade.
As much as 2020 was an annus horribilis, we were at least blessed with an extended period of fine weather from March last year. What the hospitality sector would give for the same this year, not just in the transition period from 12 April to 17 May, but over the summer as a whole.
As with the retail sector, the consumer is ready to play their part. It goes without saying, Independence Day V3 will be a great deal sweeter for both the retail and leisure sector if the weather plays ball too.