Retail forecasts report 2021 – Rethinking retail for the ne…

Retail forecasts report 2021 – Rethinking retail for the ne…

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RETAIL FORECASTS REPORT 2021

RETHINKING RETAIL FORTHE ‘NEWNORMAL’

RESILIENCE AND OPPORTUNITIES IN A NEW RETAIL WORLD

CONTENTS AN INTRODUCTION FROM SOPHIE MICHAEL.......................1

2020 GROWTH BY CATEGORY AND FUTURE OUTLOOK...... 2

RETAIL CATEGORY GROWTH FORECASTS. ........................... 4

HIGH STREET SALES TRACKER..............................................13

RETAIL TRADING CONDITIONS............................................15

WINNERS & LOSERS. ............................................................18

RETAIL IN THE AGE OF COVID-19. ....................................... 20

CONCLUSION...................................................................... 35

Reviewing the last 12 months of 2020, our Retail Forecasts report analyses the previous trading year’s activity and highlights key areas of focus for retailers entering 2021. Even though we are still in the depths of the pandemic, with hopes that it could subside over the years ahead, it leaves behind a retail sector that will look radically different at every level. However, many have shown great resilience in 2020 and proved that even in the most turbulent of times there are opportunities and success stories to be found. #BDORetailForecasts RETAIL FORECASTS REPORT 2021

AN INTRODUCTION FROM SOPHIE MICHAEL HEAD OF RETAIL ANDWHOLESALE

In the year since we issued the last Retail Forecast Report: Adapt, Embrace and Innovate, those headline words have taken on new significance. The COVID-19 pandemic has impacted the UK’s way of life, economy, and consequently, the retail sector more profoundly than any other event in recent history. Beyond the headline statistic of 2020’s 3.6% fall in retail spend, the biggest year-on-year decline in more than fifty years, are a wide variety of different experiences. This single statistic itself is merely a mid-point in a vast range. At one end are the larger declines suffered by retailers exposed to the limitations on physical shopping. Bricks-and-mortar sales have plummeted alongside footfall as consumers have had to navigate economic uncertainty and fluctuating social distancing regulations. However, there are those who have actually had a stellar 2020, capitalising on factors including consumers’ improved disposable income, changes in lockdown interests such as DIY and cooking and the transfer of consumption on services such as from restaurants to supermarkets. However, even these better performing retailers have had to absorb cost increases. Coping through subsequent waves of the pandemic will mean the entire sector could still be vulnerable to poor consumer confidence, and further pressure on supply chain continuity. In this report we analyse 2020’s overall performance by category and assess some of the pandemic’s fallout, both negative and positive. We also explore why some businesses and sectors have fared better than others. Some of the main and interwoven trends we will cover are: X consumers re-assessing how they shop, what they need to buy and prioritising health X shift to home working and the significant impact on specific locations X acceleration of channel-switch and increase in store closures X the need to provide shoppers with a ‘COVID-19 secure’ experience X supply chain and delivery logistics challenges to meet delivery demands X the competitive consolidation and emergence of new digital and multichannel retailers and models X how retailers are becoming conscientious operators X how retail restructuring has become the ‘norm’ and changed the fabric of bricks and mortar retailing. At the same time we will examine how the best and most resilient retailers across a variety of sub-sectors such as fashion, health and beauty, home, DIY and gardening, grocery, and electricals have navigated this tumultuous year. At the time of writing we entered a second COVID-19-related lockdown, and are still in the depths of the pandemic. With the closure of non-essential stores during the ’Golden Quarter’, and an EU trade deal still undecided, the risks for UK retailers over the next year are considerable. However, many have shown resilience in 2020 and proved that even in the most turbulent of times there are opportunities and success to be found.

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BDO LLP | RETAIL FORECASTS REPORT 2021

2020 GROWTH BY CATEGORY AND FUTURE OUTLOOK

While the recent announcement of a potentially highly effective vaccine means that 2021 generally looks much brighter, it still promises to be another turbulent year. Only by looking at the impact of COVID-19 on 2020, on everything from channel performance, to consumer behaviour, to the restrictions placed on businesses, to supply chains, to the economy and housing market, can we then begin to understand what 2021 (which will also see us begin a radically different relationship with the EU) and beyond may look like for retailers and consumer focussed businesses.

The Path to Recovery and ‘Normalisation’ 2020 Retail Growth Rates and 5 Year Forecast With High And Low Growth Scenarios

5.0 4.0 3.0 2.0 1.0 0.0

4.5

3.9

2.2 1.0 3.0

2.4 3.0

1.0 2.6 3.0

0.9 2.0

1.0

0.2

-1.0 -2.0 -3.0 -4.0 -5.0

-1.5

-3.6

2020

2021

2022

2023

2024

2025

High Growth Scenario

Base forecast

Low Growth Scenario

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