2020 was a year unlike any other. The retail and leisure sector experienced one of the greatest years of change and has been subjected to unparalleled upheaval. Social settings such as bars and restaurants in the hospitality sector have been closed for the majority of the year, and high streets have suffered significantly with the pace of consumer habits forcibly changing even more rapidly. We reflect on the outcomes of 2020 and what we might expect to see in 2021.
1. The Importance of ESG
Environmental Social and Corporate Governance, also known as ESG, has become an increasingly important consideration for consumers this year, and as such, brands have placed a greater focus on it too. Some have chosen to do so by putting a focus on the circular economy, for example Ikea's, launch of a second hand furniture recycling scheme through which consumers return unwanted furniture (which Ikea will renew and resell) in exchange for an Ikea voucher. Not only does this offer consumers an attractive financial incentive, but also offers an easy opportunity to be more sustainable. Its popularity has been reflected on social media platforms where consumers can demonstrate their commitment to being more environmentally friendly. In turn, this provides companies such as Ikea with a valuable strategic opportunity in the form of free advertising.
Even where the execution of this was perceived negatively by some, for example, the significant backlash Sainsbury's experienced against their Christmas advert leading some to proclaim they would boycott the supermarket, the outcome of this was for a number of supermarkets to band together in a show of solidarity.
Themes of collaboration amongst big brands has been prevalent, for example Burger King have used their social media to encourage its customers to purchase from other fast food venues, and this will be crucial to many companies' survival out of this year, whether with other brands, their landlords, suppliers or consumers.
It is clear, therefore, that ESG, and wider moral considerations, will be at the forefront of consumers' – and by implication, companies' – considerations in 2021. It will, however, be important for companies to ensure it is targeted thoughtfully to its target consumers, in order to remain competitive and profitable in a difficult market.
2. Consumer Habits in a Post-Covid World
The impact of Covid-19 will clearly be felt for many years to come. The high street has arguably suffered the most from lockdowns throughout the UK, as well as globally. However, what is reassuring for the retail sector, particularly given the high street has been declining for a number of years even before the Covid-19 pandemic, is the desire by many for a return to the physical store on the streets. As lockdowns have lifted, many consumers have actively chosen to purchase products from small independent businesses, in order to support their local community.
However, with a significant majority of the population working from home, consumers do have more time than they might have had previously, which begs the question whether the new appreciation for the high street and local businesses will last. As the dust settles on the pandemic, people will naturally return to their need to consume in the most convenient way, which will ultimately take them back online, however there is likely to be more reliance on local stores as people navigate more from their homes. We are likely to see much more diversification on our high streets to entice people out and, as noted above, more collaboration amongst businesses and landlord to create an attractive hub.
3. Retail Diversification and Subscriptions
2020 has highlighted how important it is for the retail and leisure to move with societal change, rather than follow it, in order to survive. Many household names, such as Debenhams and Topshop, have lost their place on the high street due to their inability to keep up with consumer demands. Those which have remained competitive have done so through adapting their current offerings to provide consumers with varied methods of access to the same goods and services as in the pre-Covid world. In the lead up to Christmas for example, we have seen many brands offering a "call and collect" service, whereby customers can select their desired products online or from a catalogue, call their local store to place an order, and collect it the very same day. This removes delivery issues and any delay in receiving an order, and kept shops operating.
Subscriptions are another example of how beneficial adapting and diversifying business can be. Consumers clearly have an appetite for subscriptions given some of the largest global companies such as Netflix and Spotify operate under a subscription model. However, this year has seen the growth of subscription services in the retail sector, initially offered as a way of securing certainty of cash flow and a consumer base, but likely to form a crucial arm of any retail business as we look forward. As brand loyalty continues to be a battle many retailers are fighting to retain, subscriptions offer one way of ensuring repeat business.
Perhaps the most prevalent example out of lockdown is Pret's monthly coffee subscription, introduced shortly after the lifting of the first lockdown this year. This has arguably been a lifeline for the business during what has been an incredibly tough period as many stay and work from home. Not only do subscriptions such as Pret's attract new consumers, but they also help retain and maintain existing clientele. It is important to note however, that although subscriptions on the surface seem like a safe diversification option for businesses, it does require a digital platform capacity, and therefore may not be an immediately accessible option for smaller businesses for some time. We may see some businesses fall behind if they are unable to fulfil a potentially growing market in the subscription-based sector.
Subscription boxes can be delivered to our doors and we are likely to see many businesses invest more heavily into the subscription realm in 2021 as more high street favourites, and newcomers, enter the subscription market.
4. DIY Food Package and Gyms
One thing many have missed during lockdown is their favourite high street meal. At the beginning of lockdown many restaurants created "DIY Food Packages", providing consumers with all the ingredients needed to replicate their favourite meal at home. High street favourites such as Patty & Bun, Pizza Pilgrims, and Galvin's DIY food packages have all entered the DIY food package market. Perhaps initially met with some hesitance from more up-market restaurants who feared it would downgrade their offering in the eyes of their customers, it has proven to be a lifeline for many restaurants during lockdown, and been met with such positivity that it is likely to continue as life returns to normal.
With all those extra calories, the closure of gyms has been problematic for many. Online classes have however, offered not only existing clientele a way to remain in shape but also enticed new clientele who could either not afford a normal gym membership or who did not want to go to a gym to work out. Fitness companies such as Peloton, the at-home spin bike offering users access to live spin classes, have exploded during lockdown. Gyms will therefore need to find ways of tempting people back, or continue to provide online classes, in order to keep up with their clientele's new way of working out.
It is likely that in both cases the "at home" element will continue to supplement, rather than replace, the "live". 2020 has been a year of unwavering levels of routine and the intermittent lifting of restrictions led many to flock back to bars, pubs, restaurants and gyms when they could. The pent up demand for activity outside the confines of many individuals' and families' homes will naturally lead itself to a return to activity, but the convenience of bringing these activities home will be attractive to many.
5. Repurposing of Leisure
With the structural changes Covid has brought to the sector, many will be looking at repurposing their spaces to offer a wider variety and more flexible range of uses. Department stores, as one of the hardest-hit in recent years, are perhaps the most obvious example for a case of repurposing. One such example is shopping centre giant, Hammerson, who are planning to repurpose part of a former Debenhams site into residential space.
The travel sector has been hit hard this year, and many are itching to get back on holiday. However, with the extra restrictions and quarantine concerns, the staycation is likely to continue to be a popular option next year. This is welcome news for the UK hotel industry however the extensive offerings hotels had pre-Covid may no longer exist. Breakfast buffets, spa treatments and a turndown service are all services where hotels need to be careful to operate in a Covid-safe manner.
Entertainment venues will also likely experience the same kind of challenges, with a packed out 02 arena or football stadium being very unlikely, for at least the first half of 2021. As with the retailers, many musicians are therefore diversifying their offering by streaming live performances from iconic entertainment venues direct to fans at home. For example, boy band McFly have started "McFly Total Access", a subscription channel which gives fans access to exclusive content and live stream performances from the pop group. We will likely see more artists from the entertainment industry branching out into similar offerings.
Even when festival-goers, stadium-attendees and shoppers can once again visit their venue of choice, crowd control and hygiene are likely to be high on the agenda as we enter a period where the threat of a virus outbreak will still be on many minds. It has been unfortunate that even where retail and leisure operators have invested into creating Covid-secure spaces in 2020, they were subjected to closures and lockdown, but these measures may turn out to be long-term requirements even beyond government-enforced controls.
Although 2020 has provided a great number of obstacles for the retail and leisure sector, it has also provided opportunities to those who have been able to adapt to the unfortunate circumstances of the year. There are some welcome introductions that will hopefully continue throughout 2021 in light of changing consumer demands. Wherever consumers decide to go, and whatever they decide to purchase, we can be sure that this year's latest must have accessory – the Covid mask – is here to stay.
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