Opportunities ahead for innovative retailers

Opportunities ahead for innovative retailers

The retail sector has experienced considerable fluctuations in demand in 2020. With sales volumes reaching record levels in the months prior to the coronavirus crisis, the sector was in a position of strength, with further short-term gains stemming from the surge in panic buying witnessed at the start of the pandemic. This was followed by a record fall in activity following the onset of lockdown measures before a strong resurgence in the summer months saw activity recover completely from the pandemic-induced depths. This recovery has come despite falling consumer spending power, with one explanation being that retail has displaced other forms of spending that have been less accessible amidst the pandemic and associated restrictions.

There has been some significant intra-sector variation in performance, however. Online spending channels have taken on increased importance in recent months, accelerating an already existing trend of greater reliance on e-commerce. Online spending levels will likely remain elevated, given greater adeptness amongst consumers and businesses alike. Meanwhile, the traditional bricks-and-mortar store looks set for much greater fragility, fuelled by weaker footfall levels and pressure from online retail. This will particularly be the case for smaller enterprises, being unable to benefit from the economies of scale exhibited by their larger counterparts.

Further, with subdued incomes and the prospect of higher unemployment on the horizon, the retail sector could yet be impacted as a result of falling discretionary spending levels.