City Centre Stores Count The Cost Of Continued Lockdown Measures
While the past few years have seen proximity stores gain traction at the expense of larger outlets, the coronavirus pandemic has accelerated this trend... albeit with a twist.
The introduction of successive lockdowns in most major European countries, often with prohibitory distancing rules attached – Parisians were restricted to within 1km of their homes at one point last Spring – has meant that the 'local shop' has taken on greater relevance. Thanks to COVID, we are exercising, commuting and shopping within an increasingly confined space.
But could this lead to longer-term changes in consumer behaviour?
According to Tesco chief executive Ken Murphy, the growing number of shoppers working from home has had a negative impact on the group's town centre outlets, while suburban stores are thriving.
"The city centre stores have been impacted, there's absolutely no doubt about it," Murphy explained in a conference call to coincide with the group's recent third-quarter trading announcement.
"In some city centres, there's quite a decent residential population, and they see our convenience stores as a lifeline, and continue to shop in them, but there's definitely a drop in trade in relative terms. Whereas, in our neighbourhood stores, we're seeing strong growth."
In time, as COVID-19 subsides, things aren't likely to go back to the way they once were, either.
"As more and more people work from home – and we believe that working from home will be institutionalised in our society, not on a five-day week, but certainly on a two- to three-day week – we believe that this trend will somewhat persist," Murphy added. "We're looking all the time at how we adapt our offer to that."
Around London, for example, sales in suburban areas have seen significant growth, according to a recent Nielsen study, with 9% of stores seeing more than 100% growth in sales year-on-year.
Allied to this, a new study by Accenture has suggested that businesses may never go back to traditional ways of working in the future, requiring firms to rethink their strategy.
Accenture’s COVID-19 Consumer Research, carried out between 26 November and 10 December, found that 43% of people who had never worked from home prior to the pandemic now say their preferred working pattern in the future involves working from home at least once a week.
This trend is also being borne out in the discount channel – compare the contrasting fortunes of Poundland (also known as Dealz in Ireland, Poland and Spain) with that of rival B&M European Value Retail, for example.
In the first quarter of its financial year, which included the Christmas period, Poundland, which boasts a predominantly high street footprint, saw like-for-like sales up 4.3%. B&M, meanwhile, which is based around out-of-town-locations, saw like-for-likes up 21.1%.
"With our combination of exceptional value and convenient Out of Town locations, we are confident that our business model will prove highly relevant to the needs of customers in 2021," Simon Arora, B&M's chief executive noted in the group's trading statement.
According to Jonathan Rock, retail analyst at GlobalData, Poundland should embrace the future in order to compete in an increasingly dichotomic 'new normal'.
"While Poundland’s ill-suited store locations are hard to adjust, a lack of investment in online/delivery capacity following the first lockdown last year has come back to bite the discounter, as it now faces a similar period of vastly reduced high street footfall," he says.
"Even if constructing an online platform is uneconomic for the discounter, partnerships with delivery services such as Deliveroo could help combat this drop in footfall.”
Just A Blip?
Of course, the lifting of lockdown measures in the run-up to Christmas, and the images of packed city centres that followed – social distancing sadly not always adhered to – would indicate that the high street still has a future, particularly around busy shopping periods.
But sluggish vaccine rollout programmes and the threat of lockdown measures continuing into the summer could lead to these new shopping habits becoming even more ingrained in the consumer psyche.
“Companies around the world are already signalling they will no longer operate the way they did in the past," says Scott McKenzie, global intelligence leader at Nielsen. "People will commute less, work from home more and move further away from urban settings.
"The consequences of this for the locations of stores, the formats of stores, and the assortment in those stores are far reaching. If you add in the dynamic of a massive rise in e-commerce for the FMCG space, the need to respond to these new shifts are critical.”
© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine