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Polarisation in retail and wholesale: what this means for the UK economy
This is the latest update from Santander’s retail & wholesale team on how the coronavirus pandemic is affecting our clients and the sector as a whole.
The retail and wholesale industry has long been seen as a bellwether for the British economy – and the stark contrast in fortunes between various parts of the sector highlight just how volatile a period we are living through at present.
Last week, the British Retail Consortium (BRC) and KPMG published their latest monthly retail sales index report, which features in-depth analysis of the opportunities and challenges facing retailers and wholesalers – and it is worth taking a closer look at the report’s findings. In March, retail sales were down 3.5% on a like-for-like basis against March 2019, although total sales were 4.3% lower last month – the steepest decline since records began back at the start of 1995.
But these cross-sector statistics hide a significant difference between food and non-food retail: like-for-like food sales were up 4.9% in the first three months of 2020, and 5.1% higher on a total basis. While non-food sales dropped by 6.7% like-for-like and by 6.6% on a total basis.
This decline, the report points out, has been felt keenly in adult fashion – here, many retailers are now looking to roll out their mid-season sales ahead of schedule, and we will continue to support businesses here through the Santander Retailers Offer initiative (see below). However, some sub-sectors, including leisurewear and fitness, have been boosted by demand from individuals confined to their homes.
Household goods: some winners
Among household goods, demand patterns reflect new lockdown-related needs: sales of computers and related equipment, as well as board games and video game consoles have risen, as have purchases of outdoor toys and sports equipment. Demand for some higher-value items such as furniture has fallen, but sales of fridges, freezers and even TVs have been buoyant.
The lockdown rules also mean that ecommerce has emerged as the clear success story of the crisis: online non-food sales were up 18.8% in March, while the non-food online penetration rate rose from 29.3% in March 2019 to 43.5% last month.
However, it is worth noting that research from Retail Economics suggests around a third of shoppers had experienced technical difficulties with making online purchases and had not been able to buy the goods they need. This presents an excellent opportunity for ecommerce businesses to look at the performance and reliability of their sales platforms.
Unsurprisingly, health and wellness categories have benefited from general concern over the coronavirus virus.
Rethinking the supply chain
The current challenges have provided many businesses with an opportunity to assess their supply chains with a view to making them more robust and resilient. De-risking supply chain concentration can play an important role here. We also welcome news that trading ties between the UK and India are becoming stronger: last week, the two countries’ governments reached an agreement on the supply of 2.8 million paracetamol to British retailers.
Overall, clear trends are emerging as consumers respond to the pandemic. Santander will continue to help businesses respond to these trends in a number of ways:
- We can help retailers – especially those who have been forced to close high-street branches – sell excess stock through digital channels by taking advantage of the Santander Retailer Offers initiative. This is a programme which allows Santander personal banking customers to earn cashback when shopping at selected stores, and we are looking at ways in which we can promote mainstream brands to these customers.
- Our liquidity management services can help wholesale and retail businesses to cope with unprecedented demand levels, particularly for essential goods, by providing support for short- and medium-term working capital.
- Santander’s relationship with a large online fashion retailer could give companies in the fashion subsector the opportunity to sell stock in categories such as activewear, beauty, nightwear and loungewear.
- Finally, our collaboration with Elavon can help Santander customers to take their first steps in ecommerce through their range of solutions.
To discuss how Santander can help your business during the coronavirus pandemic, please contact: firstname.lastname@example.org