Published on May 20th, 2020 | by The GC Team0
Coronavirus obliterates hopes of improved retail health for foreseeable future
The UK’s retail health worsened considerably in the first quarter of 2020, with the impact of COVID-19, the key driver, extinguishing previous hopes of any recovery.
According to the KPMG/Ipsos Retail Think Tank, retail health fell by 3 points to 71 – a new record low for the RHI (Retail Health Index), which is a quantitative and qualitative assessment of demand, margin and cost.
An even more seismic drop of 9 index points, taking the RHI score to just 62, is predicted in the second quarter, greater than the fall recorded in the shadow of the 2008/09 financial crisis.
“The nation’s lockdown, and its impact on demand in particular, has sealed the fate for many retailers, especially those deemed ‘non-essential’,” said the RTT
Reflecting on retail health in the first quarter of 2020, Paul Martin, co-chair of the RTT and UK head of retail at KPMG, said: “If looking at total sales in the UK over the first quarter of 2020, non-food retail was on a -1% trajectory in both January and February. However, from mid-March onwards, the decline was far more severe as anxiety around COVID-19 started to rapidly rise. The lockdown only came into effect on March 23rd, but non-food retail sales fell by anything from 50–100% thereafter, dependent on whether the retailer in question had any stable online operations or not.”
Martin pointed out that the lack of consumer engagement was mirrored by footfall figures during the quarter too. A record decline of 14.2% was recorded in February and quickly superseded by a fall of 51.3% in March, and that measured only the footfall at stores which remained open.
Looking ahead at the prospects for the second quarter of 2020, RTT’s economist Ruth Gregory of Capital Economics said: “We think that the lockdown implemented to contain the coronavirus will trigger a peak-to-trough fall in GDP of around 25% in the first half of this year, which would dwarf the 6% drop during the 2008/09 financial crisis. Retail sales could fall by as much as 30% in parallel.”
Tim Denison, co-chair of the RTT and director of retail intelligence at Ipsos Retail Performance, said the longevity and nature of the current lockdown measures is largely unknown, but there remains little doubt that retail will be severely impacted.
“Unlike previous historic downturns, this is not only about the consumer’s response to what is occurring around them, but rather the mechanics of daily life have fundamentally changed, forcing the consumer’s hand and blocking demand. Even when restrictions are lifted – whenever and however that may be – it’s unlikely we’ll see a return to normal by any means.”