Corona panic buy - email 1 of many...

26 March 2020

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The Bulletin

Coronavirus - Email 1 or several.

Such a strange, strange time.

Apologies for the near radio silence but it has been a time to watch in some cases and observe what has been happening.

We are working hard at keeping up with things in the sector and it's so strange. Stores are recovering well and the lockdown policies have aided efforts, however, the wider retail sector will take a battering, whatever the chancellor sets down, the help is notable, but who is able to wait until April?

The tax deferrals are appreciated but getting through to HMRC is near impossible to discuss anything else, as there's just no manpower as they're off with Covid symptoms, or indeed, they never had the manpower in the first instance.

For food retail, it's a boon time and despite stock shortages, the industry has and continues to perform superbly with so many positive tales of great work, help for employees and local communities. The load has somewhat disproportionately placed on food retailers as they were hit with peak demand and no central guidance around what to do, or indeed, controls on people shopping.

We must guard against hindsight bias in the coming days, weeks and months. It's a once in a generation incident and there are lessons to be learnt, without a doubt.

However the reality is that purchase limitations did come into shops, they weren't too late necessarily, the demand was off the grid and there was no one guiding centrally about what should be happening. Or indeed, if the demand was necessarily going to keep coming.

It wasn't as easy as we may convince ourselves it was at the time.

So onwards and upwards as we adjust to life under lockdown (of sorts) and it's fair to say that life won't return to normal for some time yet, which means that there is a storm coming down the track.

The time of year is intriguing if it's a 3-week lockdown (it seems fair to assume that some measures will remain in place beyond that), we are then beyond Easter (a big old event for retailers, last year, it was disrupted heavily by hot weather).

The challenge for retailers is that their key event, Summer, is heavily dependent on weather anyway, but what sort of position will the non-food ranges be in? China is getting back to normal but there is a shipping delay as they fought the Covid19 themselves.

However, any delay is unlikely to impact Summer initially, certainly, Halloween and Christmas non-food will be impacted as numerous trade fairs and buying trips couldn't take place due to the outbreak there.

Back to School, (July/August) will arguably be the first in-store event that represents the UK getting back to normal if you can call it that.

It seems obvious to me (at least) that the schools must reopen as one of the first priorities, as we hopefully are able to overcome the virus and protect the NHS for the most vulnerable.

However, all the steer and communications from local schools have been that it could be September before that happens!...

But that can't come too soon, the challenge is the second wave of infections that may come if we don't stop the spread now. So the decision to close schools and the impact that has was entirely correct.

Clothing ranges are almost a dead duck for retailers for the Summer and there will be a margin consequence for all the grocers in this arena.

Some impacted more than others, Sainsbury's you would think more than the rest given their non-food focus, however, Argos remains open and will be doing a good trade around products to facilitate home working alongside various other products. Especially with home delivery.

The challenge around the stormclouds is that, like the hot weather in 2018, aligned with England progressing in the World Cup and customers having a BBQ almost every night and heading to the pub for the rest of the time.

Suddenly, beyond the record sales figures, customers realised in August and certainly September that they were skint and pulled their spending back, sharply.

Will we see that again once the crisis slows down? Where has the money come from for customers to spend as they have, at such levels? It's not just a few extra items, it's the frequency of trips and the products bought, often cannibalised choices given the regular product may have been out of stock.

Customers have not necessarily stockpiled, rather bought more to maintain their stock levels, having seen the stores near empty (not aided by clowns on the TV showing empty shelves and having a laugh about it, early on) turning it into a 'run on the bank' style scenario.

Which then didn't help matters as momentum grew.

There's so much to discuss and further emails will come out around online, the 'efficiency' model (the idea that a model to reduce working capital and save money is suddenly not right with a global pandemic) alongside questions over attitudes towards big grocers in this brave new world.

Will the switch to big shops continue in the new world? Or will convenience operators like the CoOp (no doubt picked up trade at this time) continue to grow even stronger, given the new customers who may have been attracted to the chain?

It's a strange time to be in and an uncertain time too. Retailers turning sales away effectively and asking customers to not shop online. Unprecedented (very much the word of 2020, alongside 'furlough').

We'll be here to guide everyone through as only we can.

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From the Grocery Insight newsletter archive, first sent to subscribers on 26 March 2020. Steve now writes at read.groceryinsight.com. See also the blog archive and briefings.