“The world will never be the same again”

SoundOut/Columbus Consulting surveys reveal the depth and breadth of the challenge for retailers going forward – 1 June 2020


(Credit: Getty Images)


Steve Rowe, chief executive of Marks and Spencer, said last week that “the world will never be the same again” for fashion retail. Geoff Ruddell, Morgan Stanley’s retail analyst since 2005, wrote in a recent note that the effect of Covid-19 on the industry “is set to be so profound that it will render irrelevant most of the research we have ever written”.


Retailers face a world where consumer spending power has been decimated, past behaviour may no longer be an indication of future shopping habits/trends, and consumer online/instore shopping habits have changed – perhaps for ever.

A series of consumer surveys canvasing over 20,000 US and UK consumers run by Columbus Consulting and SoundOut throughout May 2020 has revealed that retailers will be flying blind over the next 12 months – at a time when most are already on life support.


The results are revealing and suggest that the past will be a poor predictor of consumer behaviour going forward. Reliable consumer demand data will become the most important metric and companies that place predictive consumer insight at the heart of their bounce back strategy will be best placed to weather the storm.


Consumer spending power

While it is not yet clear from sales data how hard consumers have been hit financially by the crisis, our research shows that across the US and UK around 75% of workers have been financially negatively impacted by the crisis:


…and for the 75% impacted, the average loss of income (before government benefits) has been 37% in the US and 33% in the UK:


Looking at the results by sector around 40% of all services and retail jobs have been lost in the US but its clear that the UK’s furloughing scheme has protected many jobs that would have otherwise been lost in these sectors:

Clearly for many the financial impact will be temporary so we asked people how confident they are about their future employment prospects revealing that, in the US, over 50% of consumers are somewhat or very concerned about their employment prospects over the next 6 months – suggesting that consumer confidence may remain subdued for the rest of the year:


Future purchase intent

While it is clear there is likely to be significantly less cash flowing from consumers for the foreseeable future it is also interesting to see how consumer attitudes to fashion purchases have change During lockdown, fashion purchases have been very subdued:


However over 65% of people believe that they will be shopping again within a month of lockdown ending:


That said, there has been a major shift in people’s attitudes to buying more of what they need rather than what they want, and this could hit fast fashion/discretionary spending retailers particularly hard:



Online shopping habits

Turning to how the lockdown has changed the outlook for physical retail, it is clear that online retail growth has been turbocharged by the crisis, forcing many consumers to move to online from instore. History shows that this is typically a one way street and those who switch rarely return to their previous habits.

Overall, 72% of people have increased their online (non-food) shopping with 28% reporting that much more, if not all, of what they buy is now online



Conclusion

Taken together, the above results make sombre reading for non-food retailers (and fashion retailers in particular). People have less money, are more focused on needs not wants and have moved to online shopping in droves. This is a triple whammy for retailers predominantly trading from physical store estates and suggests the outlook for the rest of 2020 and beyond is bleak.


So what should retailers do to mitigate this and protect what is left of their business? The customer has always been the focus of retail and knowing your customer sits at the heart of this. But as a result of the crisis the customer has changed beyond recognition. You do not know them anymore.


The implications of this are both fundamental and wide ranging.

For many retailers this will trigger complete review of their omnichannel strategy, with some deciding to abandon omnichannel altogether and move 100% online where overheads are more easily matched to demand. Product ranges, assortments and depth of buy will undoubtedly change radically and last year’s sales data will be all but useless in predicting future demand.


The only certainty is that the future is unpredictable. As a result, forward guidance from consumers themselves is set to take on huge importance. Businesses that rapidly place predictive consumer insight (the voice of the customer) at the heart of their bounce back strategy to help understand which products to select and how deep to buy will significantly increase their survival chances in the post Covid era. Without this they will be flying blind.


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