Richard Curry, Partner and lead food store adviser at Rapleys shares his top five projections for the retail industry in 2021. From consumers adapting the way they shop to a surge in the convenience store sector, there is no doubt that Covid-19 has had an impact – but for how long?
One stop shop
Retail closures, social distancing and limitations on people’s time spent out of the house has meant the big weekly shop has made a resurgence. This had been dropping off with people more likely to be doing fewer but more shopping trips, including in transit to and from work as well as looking for more experiential options such as at farmers markets. Especially during Covid-19, the one stop shop is a necessity to minimise exposure. The big supermarkets, with wide aisles and lots of car parking facilities have clearly benefited although this is unlikely to remain. While high street retail has continued to struggle, lockdown has improved awareness of local offerings and many of those have been quick to incorporate home delivery into their services. The big supermarkets remain cautious and are not committing to capital expenditure to build and fit out new stores. This has given the ‘Big Four supermarket the opportunity to consolidate their estates and right-size their existing estate fit for the future.
Bringing retail home
While the one stop shop is back, consumers are ever more mindful of product sourcing, supply chain, price and environmental issues such as carbon footprint. This has helped stimulate more interest in the offerings of local retailers and we have seen consumers choose to buy where they can from farm shops, bakers etc. At the other end of the spectrum, though, the lockdown restrictions have clearly given rise to a surge in-home delivery which local retailers have tried to jump in on but which the large operators with their scale and sophisticated supply chains are in prime position to continue to benefit from and compete more effectively on price for consumers who are worried about their own financial security and the wider economic landscape. This trend is here to stay. Supermarkets area venturing out to partner with delivery services – Deliveroo/Ocado, Amazon has opened new ‘dark stores’ for online only retail including its Wholefoods offering, while innovative operators like Oddbox are tapping into the interest in local and direct from farm produce.
Another trend which Covid-19 has hastened is the rise in transient shopping which can offer consumers easy access to retail from their car. This has benefited other roadside retailers including convenience stores located on fuel station forecourts. Asda’s acquisition by EuroGarages Consortium arguably shows how powerful the forecourt offering is and can be for the major supermarkets.
Discounters will continue their march
The Big Four supermarkets have been losing ground to the discounters in recent years but Covid-19 has seen a temporary reversal. Discount stores may not have benefited as much as the big supermarkets during the pandemic, as the business model relies on high volume of people doing multiple shops. That said the discount stores will keep wrestling with the large supermarkets for trade and will continue to expand.
Discounters are also considering smaller formats in urban locations and previously perceived low population towns which draw from a wider catchment in certain rural locations. Closer analysis of catchment areas will provide an accurate assessment of these locations.
Bestway’s acquisition of Costcutter has shown there will be continued opportunities in the convenience sector and there is room for other convenience offers to expand and have a presence on the local high street, which is otherwise dominated by a small number of big players. The acquisition is likely to mean a far more coordinated roll out of Costcutter stores, potentially competing with the likes of Sainsbury’s Local, Tesco Express and The Co-Ops. The existing forces in this field are facing a diminishing amount of locations that are not already covered and their interest will be in aligning with new housing developments to continue growth given they have likely reached capacity in existing conurbations.
Rapleys Retail & Leisure team provide expert advice on the ever-evolving retail sector. Our comprehensive understanding enables us to meet clients’ needs, whether this is requiring a new leasehold or assisting in the disposal of assets.
For commercial-minded advice to support your endeavours, get in touch with Richard Curry, Retail & Leisure Partner at Rapleys.
Read some of Richard’s latest commentary in The Grocer: