Channel hopping

During this period of isolation many retailers have pivoted operations to their e-commerce platforms. Is this the solution to maintain cash flow and customer engagement? Or does it present a new set of challenges?

Aside from the well-documented demand for grocery items, the lack of footfall to non-food retail destinations is inevitably having a significant impact on retailer sustainability. We have seen the immediate impact of this on many retailers, indicating the requirement for agile e-commerce strategies. Here we investigate the short and long-term implications of the drive towards e-commerce across a selection of retailers, to understand who is best able to adapt during this period.

Amazon
Amazon's broad product range and well-established supply channels have been well placed to capitalise on spend lost to physical retailers. But they are not immune to challenges: increased demand at a time where social distancing is slowing warehouse operations has delayed delivery times and limited product ranges. By scaling up staff (100k new jobs have recently been announced to meet demand), Amazon will be able to overcome this, but it raises concerns for other retailers such as B&Q and Dunelm who are facing a significant increase in online sales.

John Lewis
John Lewis stands to benefit in the short term from peaks in spending on trend items such as loungewear, minor home renovations and beauty items. The latter is a high margin market and has seen a surge as customers treat themselves. The diversity of John Lewis's product range and its established e-commerce platform has led to a spike in online sales (up 84% year on year between March and April), however, John Lewis have warned that this will do little to balance the impact of store closures in the long term.

ASOS
In contrast to Amazon's success as an established e-commerce player, ASOS has seen a 32% reduction in search interest over recent weeks. As a result, they have pulled several levers to mitigate this change. Marketing efforts and product discounts on Facebook, YouTube and Instagram have switched emphasis to popular product lines such as loungewear and working from home attire (similarly, Boohoo has seen a rise in sales of smart tops, hoodies and jogging wear during lockdown). Additionally for ASOS, collaboration with an additional 100 brands has been announced, providing a platform for high street retailers such as Topshop / Topman to take advantage of ASOS's supply chain.

TK Maxx
Retail Gazette has reported that on average UK e-commerce growth was down 5.1% year-on-year in March, however, fashion has seen more significant declines of 23%+. This is as a result of retailers such as TK Maxx, who have not only closed their physical stores, but also their online store to reduce exposure for warehouse staff. Whilst in the short-term this is a significant hit for the bottom line, TK Maxx is an interesting case study for the long-term. Many brands will have an increasing excess of inventory, creating a strong negotiating opportunity for TK Maxx in the coming months. 

Primark
Primark's owner has reported sales have gone from £650m per month to zero, as the retailer has closed all stores without an e-commerce platform to fall back on. As a result, over £220m of orders to its suppliers have been delayed or cancelled threatening the long-term viability of their supply chain. Internally, the company has shifted focus to customer engagement, in the hope that this converts to sales in the weeks and months to come.

Before April 1st, many retailers were used to conducting 15-20% of their business online. Upscaling this to 100% has presented challenges for even the most well-equipped retailers. Those who had an established multi-channel strategy and a diverse product range, such as ASOS, Amazon and John Lewis, will benefit from their ability to maintain brand awareness during this time.

Conversely, the need for investment in a multi-channel strategy has become evident for retailers such as Primark and Sports Direct, whose physical retail focus has stifled their opportunity for cashflow during this unprecedented time. Pragmatism and agile strategies are universally key during this time as we wait to see the long-term implications of Covid-19.

Tish Hewitt