Sector trends & challenges
Shift to online
Making an efficient and profitable switch to online or multi-modal retailing requires a wholesale operational transformation - from sales and marketing through to distribution, logistics and service.
Innovation remains critical
In a post-pandemic trading environment, retailers will need to focus on differentiating with a distinctive and compelling customer proposition, identifying alternative routes to market such as ‘subscription retail’.
Retailers are making major long-term strategic decision to emerge stronger post-pandemic. We can expect an uptick in mergers, non-core divestments, opportunistic acquisitions and partnerships to feature strongly.
Sector rating profile
Parts of the sector had been under significant stress long before the arrival of COVID-19. The steady shift to online, increased operating costs and subdued economic growth placed pressure on the bottom line.
COVID-19 has accelerated and exacerbated trends and issues already emerging in the sector, placing weaker operators into financial stress and distress. It’s also provided opportunities for some retailers to consolidate their market position and provide the impetus to make overdue long-term strategic decisions.
As we emerge from the pandemic, early evidence indicates that retailers with good availability, keen pricing and a clear proposition are likely to emerge bruised but intact.
The UK Retail sector is in the midst of perhaps the most significant and rapid change in half a century. Shifting consumer behaviour, complex supply chain issues and ongoing economic uncertainty will all demand agility, strong controls, and a focus on retailing fundamentals.
In a post-Brexit and post-COVID environment, oversight of supply chains is going to be more important than ever. We’ve recently borne witness to the fragility of global supply chains, especially from regions where vaccination roll-out has been limited. Retailers will need to be increasingly flexible and adaptable to supply chain issues, identifying potential issues early and taking mitigating actions to ensure availability of key lines.
Although the ‘shift to online’ was a key economic feature of the COVID-19 pandemic, as public confidence returns it’s less clear at this stage to what extent traditional ‘bricks and mortar’ retailing will make a comeback. This will have massive consequences for physical retailers, many of whom will already be evaluating their estates strategy and the operational complexity of a ‘hybrid’ offline/online distribution model.
As we’ve seen with a number of major deals announced in recent months, the appetite to invest in the retail space appears to remain undiminished. Whilst the UK retail sector is extremely mature, it’s also intensely competitive and innovative. Retailers with strong operational fundamentals will therefore continue to be seen as takeover targets.
We’re also likely to see retailers taking major strategic decisions. Divestment of non-core operations, both horizontal and vertical acquisitions (either to increase market share or build supply chain control), and increased partnering relationships are likely to become key features in the months ahead.
• Continued shift to online from traditional bricks-and-mortar
• International expansion is becoming an increasingly high priority for UK retailers
• Discounters (food and non-food) continue to take the market share
• Importance of convenience: Consumers expect a seamless ‘anytime, anyhow, anywhere’ shopping experience
• Innovation is key to winning customers and maintaining sales
• Choice, Privacy and Purpose will increasingly inform purchasing decisions
• Strategic decisions likely to result in greater deal activity in the coming months
High Street Fashion Retailer
Supported an international clothing retailer with over 600 stores across six countries and an ecommerce platform selling to over 100 countries to identify initiatives to rapidly reduce its cost base.
HMV Retail Limited
We were appointed administrators to HMV, the largest high street retailer of music and DVDs in the UK.
We traded 129 stores whilst seeking a sale of the business. Following extensive and complex negotiations, a sale of the business was achieved, preserving the majority of sites and almost 1,500 staff.
Find Your Expert
Dom Carter is Interpath Sector Leader for Consumer Markets. This includes Retail as one of three core segments. Dom drives our approach to the Retail sector nationally, supported by Will Wright and Anthony Tan and a wider team of regional specialists. For a full list of our senior people with experience in this sector use the button below.Our senior team