The steady recovery in footfall over the summer as shops re-opened has stalled. A resurgence in COVID-19 cases and subsequent introduction of nationwide restrictions by the government has resulted in footfall dropping back below 70% of 2019 levels in the week ending 1 November.
New restrictions threaten to undermine the sector's fragile recovery, but a glimmer of hope can be found in that the second lockdown is expected to be shorter than its predecessor and retailers are more prepared this time around.
Retail sales were better than anticipated in Q3. In September, non-food sales volumes achieved positive year-on-year growth for the first time since January. Given we saw average annual
declines of circa -34% in non-food retail sales over March-June, this marks a quick turnaround.
The data also shows that Christmas shopping has started earlier than ever this year. A desire to spread the cost over several paydays along with concerns around lockdowns and the availability of items will drive changes in consumer spending patterns. An efficient multi-channel offering and focus on value will be key for retail operators to succeed over the crucial festive trading season.
Further occupier fallout is inevitable, as the current crisis accelerates structural shifts in the sector. The first half of 2020 unsurprisingly saw a record 6,001 net store closures, up 71% on the
same period in 2019, according to LDC/PwC. Greater London was hardest hit in terms of total net store closures (1,008), but Yorkshire & the Humber recorded the largest loss of stores proportionally (net 3.4% of outlets closed).
With the moratorium over tenant evictions extended to year end, occupiers continue to opportunistically renegotiate leases and consolidate store portfolios either organically or via CVA/administration. Tenants are looking to take advantage of lease breaks or expiries to re-set rents and lower total occupancy costs.
While painful for landlords, the fundamental long-term issue of oversupply is being addressed. Moreover, there are active retail operators out there that believe strongly in the future of bricks-and-mortar, a fact that is too often overlooked. Sky and AO.com both opened their first physical store formats in October, recognising the importance of having both an online and offline presence.