November 2020 Lockdown Grows Commercial Gap Between Traditional and Direct to Consumer Retailers Yet Further
During the year 2020 there have already been many fundamental changes to the UK retail landscape with consumers radically changing their buying behaviour from March-June during the first phase of the Covid-19 pandemic crisis. As Government enforced restrictions limited choice on the high street,
many customers have reverted to buying their products and services from direct to consumer retailers and brands.
With the latest announcement from Government regarding the lockdown from November 4th-December 2nd the traditional bricks and mortar retail sector, which in recent months in the UK has shown some shoots of recovery, will again greatly suffer in the coming four weeks which typically are some of the most lucrative in the annual calendar in the run up to Christmas during the so called Golden Quarter. For many traditional retailers who have embraced Black Friday in late November they will now also will miss out on this pre-Christmas sales phenomenon entirely in 2020.
In recent months we have already seen many household name retail brands submit to the financial pressure brought on by the global pandemic entering administration. Coupled with wider
macro-economic pressures of increased unemployment and low commensurate forecast GDP growth in 2021 we can only anticipate further casualties on the high street next year.
It is currently very unclear whether the latest lockdown will in fact cease on December 2nd according to some senior Government Ministers who openly question the ever-optimistic Prime Minister’s assertions. More worryingly there does not appear to be a clear policy looking ahead that can deal with Covid-19 on a mid to long term basis without endlessly reverting back to a cycle of opening society for limited periods with significant restrictions followed by subsequent stringent lockdowns until a vaccine is both proven and widely circulated nationwide.
This level of uncertainty spells extreme pressure for multichannel retailers especially those who are over exposed to high street locations and retail space, but who’s direct to consumer marketing policy and operational infrastructure is still not aligned to the requirements and expectations of the ‘new normal’ retail customer.
Since March 2020 direct to consumer brands and retailers have in many cases experienced unanticipated expansion – Amazon have recorded 37% growth in sales growth in the third quarter alone – but many brands and retailers have also faced unexpected operational challenges presented by this new growth opportunity that has occurred so suddenly and are struggling to cope.
Looking ahead into the highly unpredictable year of 2021 it would appear that the online pureplay retail businesses will expand yet further in terms of the overall percentage of the retail market. During the coming decade the tipping point of 50% of all retail purchases being online will inevitably become a reality much quicker than any industry forecaster had previously predicted.
Traditional brands and retailers can certainly take advantage of this rapidly changing commercial environment in terms of selling considerably more of their merchandise directly via online and DRTV advertising, but it is also inevitable that those who have been slower in recent years to adopt a strong direct to consumer marketing approach prior to the pandemic will need to act fast and invest in D2C to be able to survive and thrive in the coming period.