Get well soon

The countries which relaxed lockdown first offer an interesting insight into how physical retail and hospitality might recover elsewhere.

We take a look at three important sectors and how they have fared since lockdown was relaxed:

Casual dining
Data emerging from Germany suggests a strong rebound in restaurant trade in May as consumers were able to meet once again with friends and family. Bookings through Open Table show restaurant visits almost returned to pre-pandemic levels in late-June and were 3% higher year-on-year in July. Although some restaurants have reported practical difficulties, such as persuading customers to be seated indoors, the overall picture suggests a strong bounce back.

The pub operator, Mitchell & Butler, specifically pointed to the German experience as an indication of what might be to come in the UK. They reported last month that sales at their German pubs had risen each week since reopening in May, driven mainly by suburban locations. 

The speed with which the casual dining sector has recovered in Germany suggests those sectors emphasising social interaction might be well placed to attract younger customers emerging from lockdown. However, a note of caution must also be struck. There is likely to be significant regional variations; for instance, inner city locations may struggle as professionals continue to work from home.

Luxury goods
There is evidence from overseas that the luxury goods market is staging a comeback, driven by wealthy consumers spending money they had saved during the lockdown. In France, for instance, sales of leather goods trebled on a month on month basis in May.

In China, Tiffany reported that retail sales had surged 90% in May – something they took as evidence of "a robust recovery being underway." The luxury French brand Hermes also reported strong sales in China and noted that "brands with an established presence and successful local strategy are likely to perform."

Household durables
Higher discretionary spending can also be seen from an uptick in purchases of household durables, such as furniture and home fittings. In the US, where some states are still struggling to contain the virus, Mastercard's figures show spending on home improvement as an area of strength for the retail sector. Hardware sales, online and in-store, rose by an impressive 36% year on year in May and furniture sales rose 7.5%.


Lingering challenges
Many challenges remain for retailers. Having spent the past months focusing on their digital offer they must now encourage customers back into their stores to make impulse purchases. In the UK, John Lewis believes that this year online sales will represent 60-70% of total, an increase from 40% last year. This has left some of their larger stores unprofitable, with large operating costs and low footfall.

A recent Brightpearl survey of retailers found that 3/4 of respondents believed that merging online and in-store experience will be important in the coming months and years, suggesting that maximising flexibility for customers will be important going forward.

What does this mean?
Some of the retail data emerging from Europe, the US and parts of Asia suggests a robust recovery might be underway for some retail sectors. Those retailers providing a more service-orientated offer, such as restaurants and eateries, or higher end suppliers of luxury goods can take advantage of pent up demand over the past months.

However, the experience will be different depending on location. Those retailers in urban areas, relying on passing office trade and tourists, might struggle more and it will therefore be necessary to adapt to an increasingly local and domestic market.

Jamie Parker