2020 was better than expected, but now what?
Many parts of the retail sector fared better than expected in 2020. Despite the pandemic, lockdowns and a recession, retail sales grew by 6% and consumer confidence in December was at a ten-year high. Some categories experienced sales growth in excess of 20% and only five of the seventeen categories experienced a contraction, with ‘dining out’ suffering the most significant fall.
JobKeeper supplemented household income and the retailers’ cost base; a double benefit to retailers. Travel restrictions resulted in a reallocation of spend as many sought ‘retail therapy’, while other support was provided through rental abatements and deferrals. The ATO and bank accommodation also provided cash flow assistance.
Retailers now face a 2021 environment categorised by:
- a cautiously confident consumer holding an estimated $200 billion in household savings;
- impending cessation of JobKeeper;
- the accelerated uptake of online and click & collect shopping;
- continued uncertainty around COVID-19 infections and travel restrictions;
- CBD demand impacted by work from home routines and a lack of in-bound international travel; and
- uncertain supply chain stability, depending on sourcing model.
Against that backdrop, retailers can improve their chances of success and capture opportunities by:
- critically reviewing 2020 results (including working capital performance), stripping out non-recurring COVID-19 benefits and costs to establish a realistic picture;
- using an analysis of the ‘new normal’ as a basis to reset strategy, focusing on the shorter-term;
- preparing appropriate contingency plans that offer some buffers should performance go off-plan;
- investing in e-commerce development, including increasing data analytics firepower to track customer behaviour and business performance, and drive supply chain improvement;
- reviewing cost base and store footprint, with a measure of flexibility to restructure where necessary and/or beneficial; and
- shoring up relationships with suppliers, financiers and customers via an integrated communication plan.