Home Business News Retail sector threatened due to soaring online sales and Covid-19 closure

Retail sector threatened due to soaring online sales and Covid-19 closure

by LLB Reporter
11th May 20 11:19 am

Coronavirus is having a significant impact on the traditional retail sector with muted demand for non-essential items due to lockdown and social distancing requirements. Retailers were already facing a challenging landscape with several big names going into administration even before the outbreak of the virus.

The latest UK Q1 Industry Report from commercial data and analytics firm, Dun & Bradstreet, shows that the number of business liquidations in the sector increased by 0.8% in Q1 compared to Q4 in 2019, with 380 businesses were liquidated between January and March 2020.

However, as this data relates mainly to a pre-lockdown period there are expected to be many more casualties in Q2 with clothing retailers Kath Kidston, Laura Ashley, Oasis and Warehouse all going into administration in April and clothing stores seeing a fall in sales of 34.8% in March.

The strict lockdown restrictions across the UK have required the majority of non-essential brick and mortar retail stores to close their doors, and despite government relief and support packages, this is likely to have a lasting effect on the industry.

Monthly retail sales volume for March 2020 fell by 5.1% and the only sectors to see growth were food stores and non-store retailing. COVID-19 has only exacerbated the continued trend for online retail with the proportion of sales rising to a record high of 22.3% in March 2020 including an increase in supermarket online sales due to the lockdown, while Springboard reports today an 80% decline in footfall for April.

The latest distributive trades survey from the Confederation of British Industry shows that 71% of all respondents saw a drop in demand in April, while only 16% reported an increase. April 2020 was the joint-worst month on record for sales – the other being in December 2008, at the height of the financial crisis. Worryingly, nearly all (96%) of survey respondents reported cash flow problems, while one-third said they were experiencing problems accessing external finance.

Commenting on the report, Markus Kuger, Dun & Bradstreet’s Chief Economist said, “As the coronavirus pandemic continues, the global economy is set to contract in 2020 more than it did during the global financial crisis in 2009 and Dun & Bradstreet has downgraded ratings for around 100 countries worldwide. This includes adjusting our outlook for the UK economy to ‘rapidly deteriorating’ and the country risk rating is at its lowest ever level, based on analysis of supply chain data, plus the political, economic and market environment.

“The retail sector is likely to be one of the hardest hit and we have seen several household names completely disappear from the high street, even before the pandemic took hold. The mandated closure of non-essential stores and furloughing of staff, coupled with the accelerated trend for eCommerce, means that traditional retailers are facing yet another year of decline and uncertainty.

“While the government has launched several support measures specifically for the retail sector, such as business rate deferrals and cash grants, Dun & Bradstreet is forecasting a significant rise in the number of business liquidations in the UK retail industry in the remainder of 2020 and in 2021.”

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