Quarter of Brits plan to switch to online shopping permanently

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A new report by global professional services firm Alvarez & Marsal, in partnership with Retail Economics, estimates that 17.2 million British consumers – about 25% of the country’s total population of 66.6 million – plan to make permanent changes to the way they shop, as perceived risks of contracting COVID-19 at physical stores redirects spending into online channels.

The report, called “The Shape of Retail: Consumers and the New Normal”, says consumers who perceive the risk of COVID-19 to be very high are almost four times more likely to shift their shopping habits in the long-term.

According to the research, which was carried out in March-April 2020, this new online spending group reflects those in society who have in the past been slow to adopt online banking and shopping. They have now been forced to shop in new ways for essential items, and they do not intend to change their new shopping habits.

Many have indeed found shopping online to be a lot easier, and more convenient than they had previously anticipated.

The advent of the new group of online shoppers, alongside “early adopters”, means the proportion of online retail sales in the UK is estimated to increase by an additional £4.5 billion in 2020, despite consumers cutting back spending on all non-food purchases.

The report summarises that over the next few months retailers will need to engage with this increasingly valuable new group of online consumers. Those that are successful will leverage the shifts in behaviour to fill gaps in the market. They will need to repurpose stores to meet changed customer expectations and radically change their operating models.

Erin Brookes, a managing director and head of retail for Europe at Alvaraz and Marsal (A&M), said: “Retailers are facing a make or break moment. The race is on to transform operating models, product proposition and channel mix to ensure these meet the demands of a new type of shopper. Those that emerge on the other side will be stronger and more adaptable.”

Also revealed in the research, consumer lack of confidence in the government and its response to the coronavirus crisis has impacted on intended shopping behaviour. The majority of UK consumers, 69%, do not think the government’s response has been positive, while 55% believe the risk of the virus to be high or very high.

Attracting shoppers back to physical stores is a major challenge for retailers. The priority for consumers is safety – above that of convenience, price and choice. Retailers failing to meet this expectation risk loss of confidence at a time when gaining trust has never been more important.

Meanwhile, social distancing measures place the quality of the traditional customer experience in jeopardy. Nearly half (48%) of UK consumers plan to avoid busy destinations such as large shopping centres, suggesting scepticism in the ability of retailers to reimagine the customer journey.

As revenue diverts online, retailers must look to tackle legacy cost bases. Redundant stores could be repurposed for online fulfilment, city centre hubs for consolidating deliveries, click-and-collect points, or drop-off destinations for returns. But “addressing the heavy burden of store rents” will be essential to creating sustainable business models.

A&M managing director and head of restructuring in Europe, Richard Fleming, commented: “The way we shop has fundamentally changed and it is unclear how the dust will settle. Retailers with large store footprints face onerous rental agreements and they are locked into a stalemate with landlords. The two parties need to start working more collaboratively to preserve mutual value.”

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