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Online UK Retail in 2020 and the Impact of Covid-19
Richard Lim, CEO of Retail Economics discusses the evolution of the online channel in the UK and the impact of Covid-19. There is a seismic shift happening towards the online channel accelerated by the impact of Covid-19. Even prior to the pandemic, the pace of behavioural change was already catching many retailers off guard. 12 years ago when the first iPhone was launched, the online penetration rates was about 5%. Last year (2019) it averaged 20%. We forecast an average penetration rate of around 25% as the impact of Covid-19 necessitates a shift towards online.
New cohort of customers are emerging with new customer journeys being taken – overcoming barriers to setting up accounts etc. This exposes customers to new journeys – some of this behaviour will stick. It’s probably easier to assume that these are typically older consumers, but in reality the correlation between age and this new wave of online shoppers is not as strong as expected. A lot of these consumers are young consumers, shopping in categories that they would traditionally shop for in-store. And actually, rather than age, this new cohort of consumers is better reflective of the “slow adopters” in society.
These customers present a significant opportunity for retailers reach out to new customers. But simultaneously, many retailers continue to battle with too many stores, too much space, inflexible lease structures and rising costs which is inhibiting their ability to shift their business model towards a more digitally focused proposition.
Prior to the pandemic, we estimated that there was likely to be about 20% too much retail space that would leave the market over the next 10 years. The impact of the pandemic will only accelerate this shift. Retailers need to pre-empt these changes in the market and restructure their business models if they are to thrive in this 'new normal'.
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