Retailers can tap into households’ £83bn ‘corona cash’ savings if they adapt fast
11 May 2020
UK retailers, hit hard by a collapse in turnover in the wake of store closures and disruption to operations under the Coronavirus lockdown, have a unique chance to bounce back by tapping into a huge potential £83bn ‘corona cash mountain’ of extra household savings, according a report from independent research company ConsumerCast, The UK Consumer and Coronavirus: Recovering from Lockdown.
In the April to Junequarter alone, UK households are forecast to save an extra £83bncompared with the same time last year. This could grow to an extra£197bn for 2020as a whole if the economy and jobs market starts to bounce back as expected. The buildup is being driven by plummeting spend on experiences(travel, entertainment, bars, restaurants, gyms etc.), which is forecast to slump by £112bn or 46% over 2020 as a whole, as people are unable even to access venues or move any distance from their homes, even if they want to. While spending on consumer goods (clothing, household goods cars etc.) and other living expenses (rent, petrol, gas, electricity) is set to fall, the decline will not be nearly as severe in these areas.
Household income will be hit too, but cushioned by government measures like the job furlough scheme, support for the self-employed, higher universal credit payments and mortgage holidays, it will not suffer as much as spending. The result will be huge extra saving, with the average household building up an extra £3,000 between April and June compared with last year. The over-50s will see the biggest saving boost, with50-64s piling up an estimated £3,400 per household extra, and 65-74s over £3,500. So the suggestion in recent research from Warwick University that over-50s should be confined to their homes would, if adopted, be disastrous for retail and consumer spending generally.
Retailers will have to overcome numerous obstacles if they are to be able to take advantage of this silver lining to a very dark cloud. First of all, they will need to ensure the safety of their customers and workers, both in store and in distribution and other roles. After a temporary closure of its warehouses, Next has totally reorganized them to ensure social distancing and improved sanitation, with managed pedestrian flow, adapted exits and entrances, rest areas and work stations as well as changed picking routines and avoidance of peaks in activity. In its stores, it is planning to re-open larger out-of-town branches with screened tills, distance marking walkways, sanitation stations and entry and exit management.
Secondly, they need to overcome customers’ worries about physical shopping. Communication with customers is key. B&Q has issued a guide to socially distanced shopping in its stores on its website with a video explanation explaining the measures taken to protect customers. Retailers need to use all points on the customer journey from web sites and advertising, to information displays outside and inside stores, to overcome shoppers’ worries. This is particularly important for the over-50s, who are most at risk from the Coronavirus.
Thirdly, speed of adaptation is paramount. While the Prime Minister Boris Johnson has announced some shops that are currently closed may be able to reopen as soon as next month, the full extent of April’s surge in unemployment, a key indicator for consumer confidence will be confirmed by official UK figures on 16 June. Robert Carruthers, ConsumerCast director, comments: “Those consumers who do still have jobs and money are likely to react to these figures by tightening their purse strings, with confidence levels, already on the slide, heading rapidly further downwards. While the opportunity for retailers is there, it is likely to diminish quickly as what remains of consumer optimism melts away.”
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Robert Carruthers, ConsumerCast director, can be contacted for further information or comment on 07980 860301 or email@example.com