Business

David Lonsdale: Big trends emerge after two years of tumult in retail

Exactly two years ago some Scots started stockpiling food as Covid advanced. A fortnight later the country was in lockdown. It’s been an extraordinary period.

With the publication of the timetable for scrapping the remaining curbs and statutory guidance that shops must follow, retailers can now see light at the end of what has been a very long tunnel.

If there is anything the last twenty-four months has taught us, it is that nothing is certain, and everything can change in a heartbeat.

Few could have predicted the massive upheaval in retail that took place. Grocers’ shelves were stripped bare. Major high street brands crumbled into administration. The taxpayer temporarily became paymaster to a third of the retail workforce.

Yet despite this turbulence, the industry and all its people did a magnificent job keeping us supplied with the goods and groceries we needed. Despite the tumult, it is possible to discern some trends that will likely stick. Three big ones are online shopping, sustainability, and prices.

Over the past decade the proportion of purchases made online rose steadily. Pre-pandemic online purchases accounted for 30 per cent of non-food retail sales. At the height of lockdown this doubled before settling back to 40% – five years growth in just two years.

It’s a touch early to be definitive, however the pandemic appears to have cemented existing gains and accelerated previous changes in consumer behaviour. This in turn is changing the role of stores and high streets, which must find new ways of drawing in customers. Meanwhile, many retailers invested hugely in expanding their online capacity for customers.

Experiential retail, in hibernation for two years, now has a chance to come out of its shell. Likewise, the integration of online and in-store retail will continue. Every time a customer browses online and buys in-store or browses in-store before purchasing on their phone, they prove the importance of all channels – and the way they knit together. They are no longer separate, in effect two sides of the same coin.

COP26 has passed but the sustainability agenda is here to stay. Four in five of us say we are changing our purchase preferences based on the sustainability of products we buy. Many are drawn to items with minimal plastic packaging, sourced using sustainable materials, or containing high recycled content. But good choices are still being held back by a lack of information and transparency surrounding the origin or contents of many products.

Businesses have a fantastic opportunity to fill this information void, as well as a duty to help nudge us all into making better choices. To aid that we’ve produced a guide for retailers on helping customers to live low-carbon lifestyles, to help build momentum within the industry. Eighty leading retailers are participating in our climate action roadmap. More need to get involved and drive change in their own businesses, with suppliers and customers.

While the rise of digitalisation and drive towards green business and consumerism represent positive changes in the convenience and sustainability of retail, the trend towards rising prices has few winners.

A multitude of pressures are pushing up costs – labour shortages in seasonal farm work and logistics, rising global commodity and shipping prices, and energy. Geo-political tensions in eastern Europe will exacerbate the problem. Extra government taxes add to the woes. Ultimately it is customers who pick up the tab. Retailers’ margins are squeezed, and they are unable to absorb all these new costs.

Hopefully the next two years will be less rocky, but there will be change. We will see a more tech-engaged, consumer-friendly, and sustainable retail sector, but it could well be a more expensive one.

David Lonsdale is director of Scottish Retail Consortium.

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