RETAIL AND CONSUMER BRIEFING - JANUARY 2021 - PWC
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Retail and Consumer Briefing January 2021
Today’s speakers Lisa Kien Nick Ainsley Jacqueline Hooker Tan Forrest Moore Windsor Head of Senior Retail Economics Head of Real Head of Retail Consumer Advisor Leader Estate Advisory Strategy Markets Golden Quarter January 2021 | 2
Question 1 When will consumer spending return to pre- pandemic levels? Golden Quarter January 2021 | 3
Review of 2020 Golden Quarter January 2021 | 4
Despite a dramatic 2020, retail fared better than most other
sectors…
Source: ONS
UK GDP for selected industry sectors, 2020
120
100
80
60
40
20
-
Feb Mar Apr May Jun Jul Aug Sep Oct Nov
Public admin and defence Wholesale & retail Financial services Construction
Manufacturing Arts, Entertainment and Recreation Accommodation and food service
Golden Quarter January 2021 | 5
…but not all categories did well…
Source: ONS
Weekly retail sales by category, Jan-Nov 2020
140
120
100
80
60
40
20
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
Grocery stores Household goods Dept & variety stores Other speciality retail Clothing & footwear
Golden Quarter January 2021 | 6
…whilst lockdown closed stores, online saved the day…
Source: ONS
Weekly in-store sales, Jan-Nov 2020 Weekly online sales, Jan-Nov 2020
130 250
230
110
210
90 190
170
70 150
130
50
110
90
30
70
10 50
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
Grocery stores Household goods Dept & variety stores Grocery stores Household goods Dept & variety stores
Other speciality retail Clothing & footwear Other speciality retail Clothing & footwear
Golden Quarter January 2021 | 7
…particularly in the run up to Christmas
Source: PwC Consumer Survey, December 2018-20
Proportion of spend online vs in-store
100%
8%
90%
80%
53% 55%
70%
60% 63% All online
50% Online / click & collect
Online / home delivery
40%
In-store
30%
47% 45%
20%
29%
10%
0%
Dec 18 Dec 19 Dec 20
Golden Quarter January 2021 | 8
Retailers delivered online, even if parcel carriers struggled
Thinking about your Christmas and ‘Black Friday’ shopping, did you
Source: PwC Consumer Survey, December 2020
encounter difficulties when shopping online?
Poor product Late delivery,
offering, slow difficult to return
website, lack of items, receiving the
promotions, higher wrong items / items
% of respondents
prices compared to were missing etc.
in-store etc.
68% 65%
35%
29% 28%
22%
No problems Proposition Delivery
Dec 18 Dec 20
Golden Quarter January 2021 | 9
“Seven years of online growth in seven weeks”
Proportion of retail sales online, 2018 – 2020 Source: ONS
70%
58.7%
60%
47.8%
50%
40.3%
40% 33.9%
30.2% 30.0% 31.4%
27.6% 28.9% 27.8%
30% 25.8%
18.1% 18.8% 19.8% 19.5%
20% 17.1%
11.2% 10.3%
10% 5.5% 5.6% 5.4% 5.5% 5.4%
0%
Jan 2018 Apr 2018 Jul 2018 Oct 2018 Jan 2019 Apr 2019 Jul 2019 Oct 2019 Jan 2020 Apr 2020 Jul 2020 Oct 2020
All retail Grocery Implied non-grocery
Golden Quarter January 2021 | 10Lockdown had a devastating effect on footfall
Source: BRC Springboard and BRC ShopperTrak
% change in footfall by location during 2020
20%
0%
(20%)
(40%)
(60%)
(80%)
(100%)
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
High street Out-of-town Shopping centre
Golden Quarter January 2021 | 11Chain store closures were already accelerating, but worse to
come
Store openings and closures Source: PwC and LDC survey
12,000 11,120
10,000 8,517
7,195 7,311
8,000 6,453
6,000
4,000 5,794
5,194 5,008 5,119
4,463
2,000
-
(2,000) (659)
(2,001)
(4,000) (2,848)
(3,509)
(6,000)
(6,001)
(8,000)
H1 2016 H1 2017 H1 2018 H1 2019 H1 2020
Net Change Openings Closures
Golden Quarter January 2021 | 12So what defined Christmas? Golden Quarter January 2021 | 13
Consumer sentiment recovered quickly from the initial
shock…
Source: PwC Consumer Sentiment Survey
Net consumer sentiment during 2020
3rd lockdown &
+3 Post-election Non-essential UK leaves EU
shops reopen -1
-6
-12 -11
-14 End of “Eat out
to Help Out”
-10
2nd
lockdown
-26 1st lockdown
Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21
Golden Quarter January 2021 | 14-65%
-55%
-45%
-35%
-25%
-15%
5%
-5%
15%
25%
35%
Apr 2008
Golden Quarter
Jun 2008
Aug 2008
Oct 2008
Nov 2008
Feb 2009
May 2009
Oct 2009
Jan 2010
May 2010
Jul 2010
Oct 2010
Dec 2010
Jan 2011
May 2011
Sep 2011
Dec 2011
May 2012
Sept 2012
Jan 2013
May 2013
Sept 2013
Jan 2014
Aug 2014
Nov 2014
Jan 2015
Net consumer sentiment over time 2008 – 2021
Apr 2015
Sept 2015
Nov 2015
Dec 2015
Mar 2016
Jul 2016
Sep 2016
Dec 2016
Mar 2017
Jun 2017
Sep 2017
Dec 2017
Apr 2018
Sep 2018
Dec 2018
Apr 2019
Sep 2019
Dec 2019
Mar 2020
Apr 2020
May 2020
June
Jun 2020
September
Sep 2020
Nov 2020
November
Jan 2021
January 2021
…and still far stronger than the global financial crisis
Balance of opinion
Much better off than last year
Much worse off than last year
Somewhat better off than last year
Somewhat worse off than last year
Source: PwC Consumer Sentiment Survey
January 2021 | 15Promotional activity was used to drive traffic online…
Source: PwC UK promotions tool and PwC research
Comparison of online promotions vs previous years
100%
90% 85%
90% Interest in Black Friday declined from…
80%
70% 65%
59%
60%
50%
40%
40%
50%
51% 38%
30%
20% pre-2nd post-2nd
10%
lockdown lockdown
announcement announcement
0%
-2 weeks BF/CM + 1 week
FY17-19 avg. FY20
Golden Quarter January 2021 | 16…with many retailers offering discounts…
Source: PwC UK promotions tool
Daily promotions in the run up to Christmas
Black Boxing
100% Friday day
80%
60%
40%
20%
0%
Golden Quarter January 2021 | 17…albeit more selective than the deep headline
discounts suggested
Source: PwC UK promotions tool
Depth of online general merchandise and fashion promotions offered
General merchandise Fashion
100% 3.5% 100%
7.0% 6.9% 6.3% 6.4%
13.4%
80% 22.8% 80% 28.6%
38.6% 36.8% 40.9% 28.6%
61%+ 61% +
60% 60%
41% - 60% 41% - 60%
1% - 40% 1% - 40%
40% 56.2% 31.6% 40%
56.3% 36.4%
46.0% None 48.7% None
20% 20%
26.3%
14.0% 16.4%
10.3% 8.9% 9.2%
0% 0%
BF 2019 25th May bank hol BF 2020 BF 25th May BF
2019 bank hol 2020
Golden Quarter Population: January 2021 | 18
General merchandise: 57 retailers for BF 2019 and 25th May, 87 retailers for BF 2020
Fashion: 110 for BF 2019 and 25th May, 119 for BF 2020Disposable income didn’t constrain spending, so what did?
Reasons for spending the same or more than last
Reasons for spending less than last year on year on Christmas
Reasons present
for spending shopping
the same and than last
or more
Christmas shopping and celebrations… celebrations…
year on Christmas shopping and celebrations…
Source: PwC Consumer Survey, December 2020
50% 39%
34%
37%
32% 25%
30% 23%
Celebrated less Saw fewer people Entertained less at Fewer gifts to buy More / same number More/ the same Saved money from not Tried to make
outside home home of people to buy for amount of money to going on holiday / Christmas more
spend going out special
Golden Quarter January 2021 | 19Fewer guests to host and smaller celebrations
Compared to last year, how much did you spend on Christmas shopping and
Source: PwC Consumer Survey, December 2020
celebrations this year?
More than last year Less than last year
43%
35% 32%
24% 18% 14% 13%
-33% -30% -30% -34% -33%
-37% -37%
Total 18-24 25-34 35-44 45-54 55-64 65+
Average
£385 £301 £350 £403 £465 £384 £383
spend
Golden Quarter January 2021 | 20So how has this been reflected in results so far?
Source: Company trading statements
Overview of Christmas trading results, 2020
60%
50% BRC Dec-20 results
Total sales growth: 1.8%
40%
LfL sales growth: 4.8%
30%
20%
Median: 9.3%
10%
0%
(10%)
(20%)
(30%) Fashion
(40%) General merchandise
Grocery and food
Note: shading indicates
Golden Quarter total sales rather than LfL January 2021 | 21The largest gap between winners and losers has emerged
Standard deviation between retailers’ LfL results Source: Company trading statements
40
Year Standard
35
deviation
30
2016 11
25
2017 13
20
15 2018 19
10 2019 9
5
2020 38
-
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Golden Quarter January 2021 | 22Grocery was one of the winners, driven by volume…
Source: BRC
BRC LfL sales, inflation and volumes (Oct-Dec avg.)
Food
2016 2017 2018 2019 2020
LfL sales
1.1% 2.6% 0.6% 0.0% 6.1%
growth
Inflation
(0.9%) 1.8% 1.5% 1.5% (1.6%)
Implied LfL
2.0% 0.8% (0.9%) (1.5%) 7.7%
volume
Total
3.3% 2.4% 0.3% (0.8%) 8.3%
volumes
Golden Quarter January 2021 | 23...with record sales both in-store and online
Source: ONS
Grocery sales, non-seasonally adjusted, Jan 2020 = 100
240
220
200
180
160
140
120
100
80
Dec 2018 Mar 2019 Jun 2019 Sep 2019 Dec 2019 Mar 2020 Jun 2020 Sep 2020 Dec 2020 est.
In-store
In store Online
Golden Quarter January 2021 | 24This was at the expense of hospitality
Source: Coffer Peach Business Tracker
Coffer Peach Tracker LfL growth %
20%
2018 2019 2020
0%
Restaurants (0.8%) 1.1% (24.2%)
(20%)
Pubs 1.6% 0.8% (30.5%)
(40%)
Nationwide Combined 0.5% 0.9% (29.0%)
(60%) lockdown
(80%)
(100%)
Restaurants Pubs
Note: Total sales growth % recorded in Jul-20 and Nov-20
Golden Quarter January 2021 | 25Grocers had their best Christmas in recent history
Source: Company trading statements, Kantar
Christmas trading grocery growth, 2019 vs 2020
Big Four Discount High end Convenience / other
25%
20.8%
20% 17.9%
15.7%
15% 10.6% 11.7% 9.8%
9.3% 7.7%
10% 8.1% 7.8% 7.4%
5.7%
4.5%
5% 3.2% 2.7% 3.0% 2.3%
0.4% 1.3% 0.2% 0.4% 1.4%
0.1%
0%
(1.7%) (1.3%)
(5%)
(10%) (8.3%)
Morrisons Tesco Asda Sainsbury's Iceland Lidl Aldi Booths Waitrose M&S Food Co-Op Heron Booker
Notes: Foods
• Aldi, Lidl and Heron Foods have • M&S Food has been adjusted in 2020
revised LfL in 2019 to exclude cafés (2.2% LfL increase 2019 2020
• Iceland, Asda, Waitrose and Co-op including cafés)
Golden Quarter data is from Kantar estimates • Shading indicates total sales or Kantar January 2021 | 26
• Sainsbury’s results are Grocery only estimateWhat defined the winners and what will stick?
What won at Christmas What will keep winning What the jury’s still out on
• Meeting immediate demand • Doing the basics right • SKU rationalisation
• “Fix what’s in front of • Pricing and availability • “Proliferation temptation”
you”
• Store / online standards • Treating and trading up
• Online capacity
• Being where customers want • Innovation in a downturn
• Encouraging sticky behaviour you
• Fighting for share of stomach
• Building baskets • Convenience
• Vs eating out and
• Weaker 2019 comparatives • Online delivery
Tough comparatives will make 2021 harder
Golden Quarter January 2021 | 27Strong demand for general merchandise, but only multi-
channel could deliver
Source: Company trading statements
Christmas trading general merchandise growth, 2019 vs 2020
135.0% 67.2% 51.0%
50%
30%
21.1% “High
19.9% 19.0% teens” 16.9% 14.0%
11.7% 11.0% 10.8%
10% 7.9% 8.0% 6.0%
5.0%
0.3% 1.3%
(2.0%) (1.0%) (0.6%)
(10%) (5.4%) (5.7%) (3.9%)
(11.5%)
(30%)
(33.0%)
(38.1%)
(50%)
Moonpig AO The Hut B&M Topps Tiles DFS Pets at Kingfisher Halfords Hotel Dunelm Dixons UK Sainsbury's Boots WHSmith Card
Group Home Chocolat Electricals GM Factory
2019 2020
Note: shading indicates
total sales rather than LfL
Golden Quarter January 2021 | 28Pureplay online continues to be the winner in fashion
Source: Company trading statements
Christmas trading fashion growth, 2019 vs 2020
169.0%
50% 42.0%
40.0%
40% 36.0%
32.0%
30% 25.5%
18.0% 17.0%
20% 14.0%
10% 6.1% 5.0% 5.2% 4.5%
0.3% 0.6% 1.0%
0%
(1.1%) (1.7%)
(10%) (4.5%) (4.0%) (4.3%)
(8.9%) (11.2%)
(20%) (15.8%)
(30%) (24.1%)
(27.2%)
(30.0%)
(40%)
In the boohoo ASOS UK Studio The Very Seasalt JD Sports Joules Next N Brown Matalan M&S Burberry Superdry Primark
Style Retail Group Clothing
and home
2019 2020
Note: shading indicates
total sales rather than LfL
Golden Quarter January 2021 | 29Will the “Roaring Twenties” rejuvenate fashion demand?
What did we see in 2020 What will 2021 bring? What will stick longer term?
• Fewer reasons to shop and • Diminished demand and • Access
higher promotions considered purchasing… • Inclusiveness:
• Access • … but fashion celebrations from PTM to BLM
• Digital and fulfilment • Less is more • Credit
• Credit • Complexity, discounting, • Modernised communication
• Dress for me smarter stock, right- • Role of store
• Comfort categories and sizing • Gamification
colour palette • Continued collaboration
• Circular fashion 2.0
across supply chain
• Relaxed silhouettes and • Market shake out and
tactile “luxe” fabrics • Opportunistic M&A
partnerships
• Above the keyboard
accessories
Golden Quarter January 2021 | 30So what defined 2020 for retail?
Previously… Learnt new disciplines Doing the right thing
• Five Cs still matter: • What COVID-19 brought into • More important than ever
focus:
• Channel • For your people
• Be where your customers
• Convenience want you • For your customers
• Curation • Your people are your • Government support
• Communication secret weapon • Sustainability
• Credit • Winners were fleet of foot
• Collaborations were
rewarded
Golden Quarter January 2021 | 31Question 2 Thinking about COVID-19 restrictions, when do you think things will get back to “normal”? Golden Quarter January 2021 | 32
Economic outlook Golden Quarter
Despite global growth of 4.7% in 2021, the recovery will be
uneven across sectors, countries and income levels
Projected size of selected economies in 2020 compared to their
Source: PwC analysis
pre-pandemic levels, %
2020e (%) 2021p (%) 2022p (%)
Global (MER) -3.9 4.7 3.7
Golden Quarter January 2021 | 34Rebound of consumer spending in Q3, driven mainly by 17.4% growth in retail sales Growth in GDP by expenditure, %, Q1 – Q3 2020 Source: ONS Golden Quarter January 2021 | 35
After bumpy months, recovery is expected to start as early
as February
Source: PwC analysis
Real GDP index and month-on-month changes, Q4 2019 =100
Jul
2020
Golden Quarter January 2021 | 36The economy is not expected to recover to pre-pandemic
levels until at least late 2022
Source: PwC analysis
Real GDP index, quarterly levels in each scenario, Q4 2019 =100
Annual real
2020e 2021p 2022p 2023p
GDP (%)
-9.5%
Quick recovery
-11.0 4.8 6.3 2.0
scenario
Slow recovery
-11.0 2.2 5.1 1.7
scenario
We expect the UK GDP to grow
by 2.2%-4.8% in 2021, supported
by release of pent-up demand,
mass vaccination, consumer
savings and business adaption
Golden Quarter January 2021 | 37Economic recovery and Brexit will put upward pressure on
inflation, but expected to stay below long term averages
Source: ONS, BoE
November CPIH by component, 12-month CPHI and CPI, % change estimates for 2020,
Source: ONS
% change from previous year from previous year PwC scenarios for 2021
Inflation is expected
to pick up from 0.6%
in November to
1.4%-1.5% in 2021
Q4 2020e (%) 2021p (%)
Inflation (CPI) 1.4 1.4 – 1.5
Golden Quarter January 2021 | 38Retail and wholesale are expected to rebound in 2021 after a sluggish Q1 Projected GVA average annual growth rates by scenario, % ‘Quick recovery’ scenario ‘Slow recovery’ scenario Source: PwC analysis Golden Quarter January 2021 | 39
We expect consumer spending growth in 2021 will be
driven by multiple, opposing factors
Large consumer excess savings
Release of £100bn excess savings due to lockdowns has
upward impact on retail growth in 2021
Low interest rate environment
Household credit, especially secured loans on housing, will
benefit from ultra-low interest rates of 0.1% The outlook for
consumer spending
Increased unemployment in 2021
End of the furlough scheme in April and job security will depend on how the
concerns squeeze household spending combined impact of
those drivers affects
Slowdown in housing market future spending
End of stamp duty holiday will have downward impact on
property spending
Demographic changes
Drops in birth rates and immigration drag on spending in the
long run
Golden Quarter January 2021 | 40Key takeaways for the economy and consumer spending
1 Global economy is expected
2
UK economy is expected
3
Consumer-led recovery
to recover at a record rate in to recovery strongly from fuelled by the release of
2021 led by China, but most Q2 2021 once lockdown £100bn involuntarily
countries will remain below measures are released. accumulated savings and
pre-crisis levels through record low interest rates…
Most hard hit sectors will
2021 but risks of unemployment,
return to growth, but
slowdown in housing market
unemployment, business
and demographic changes
fragility and weak business
weigh down on growth.
investment will drag on
final recovery to pre-
COVID-19 levels
Golden Quarter January 2021 | 41Consumer outlook Golden Quarter December 2020 | 42
We hoped we wouldn’t have to raise Brexit in 2021…
“Percy Pigs could be under
threat
“
Ready meals and fresh fruit
experiencing disruption
due to Brexit
“
Increase of missing
items and substitutes
“Brexit tariff costs of
c.£15m in 2021
“
Brexit trade deal set to
significantly impact
EU stores
“
Shoppers face £5 fees on
fashion items as Brexit
causes delays
Golden Quarter January 2021 | 43Where not to get caught out? Some examples…
• Don’t underestimate paperwork
• Outsourcing may not be a solution –
experts in short supply
• Careful not to alienate customers by
landing them with a fine, or expensive /
complex returns
• Don’t lose cross-border opportunities
indefinitely
• Is it worth the cost of a bonded
warehouse or separate distribution
solution in Europe?
Golden Quarter January 2021 | 44Brexit increasingly affecting consumers’ spending choices
Do you think Brexit has affected or will affect the way you spend or save money over the next 12 months?
Over the years… By age group…
30%
38%
51% 48% 55%
60% 65% 60% 62%
10%
6%
9%
11%
13%
13% 8% 14% 12%
60% 56%
38% 42%
27% 28% 33% 26% 27%
Dec 18 Dec 19 Dec 20 18 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65+
Did not change and will not change Did not change and will not change
Did not change in last 12 months, but will change in next 12 months Did not change in last 12 months, but will change in next 12 months
Did change in last 12 months Did change in last 12 months
Source: PwC Consumer Sentiment Survey, December 2018-20
Golden Quarter January 2021 | 45The young are still the most optimistic overall…
Thinking about your disposable income, in the next 12 months do you
Source: PwC Consumer Sentiment Survey, January 2021
expect that your household will be?
50% Better off than last year Worse off than last year Balance
40%
30%
20% 41%
35%
10% 22% 21% 18% 17%
11%
0%
-10% -21%
-28% -27% -29% -31%
-32% -33%
-20%
-30%
-40%
All 18 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65+
Golden Quarter January 2021 | 46…despite over-65s being least financially affected by the
pandemic
Since the coronavirus pandemic began in March, have your household
Source: PwC Consumer Sentiment Survey, January 2021
finances been affected in any of the following ways?
100%
17% 15%
90% 21% 21% 22% 21%
28%
80%
70% 16% 28%
22% Saved more
32% 42%
60% 35% Not affected
50% Other financial loss or cutback
37% 55% Lost some/all income
40% 33% 32%
30% 28% 29%
28%
20%
25% 23% 23%
10% 16% 17% 15%
15%
0% 2%
All adults 18 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65 plus
Golden Quarter January 2021 | 47Lockdown 3.0 hasn’t affected consumer sentiment as much
Thinking about your disposable income, in the next 12 months do you
Source: PwC Consumer Sentiment Survey, January 2021
expect that your household will be?
20%
10%
0%
18 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65+
-10%
-20%
-30%
-40%
-50%
Mar 20 Jan 21
Golden Quarter January 2021 | 48When will things get back to normal?
Thinking about the restrictions due to COVID-19, when do you think
things will get back to “normal”? Source: PwC Consumer Survey, December 2020
By Easter By summer By autumn By Christmas Not until
2021 2021 2021 2021 2022 or later
30%
27%
25%
% of respondents
12%
6%
By Easter 2021 By summer 2021 By autumn 2021 By Christmas 2021 Not until 2022 or later
Golden Quarter January 2021 | 49We miss holidays almost as much as we miss our friends
Source: PwC Consumer Sentiment Survey, January 2021
What are you most looking forward to doing once you are allowed to?
Top choice 2nd choice 3rd choice
80%
70%
60%
50%
40%
30%
20%
10%
0%
Friends & family Holiday
Holidays Restaurant Non-essential Pub Live events Cinema Gym
shopping
Change in
interest vs.
June 2020
Golden Quarter January 2021 | 50On balance, we’ll rein in our spending on every category
How do you expect your spending to change on the following categories in
Source: PwC Consumer Survey, December 2020
the next 12 months?
Spend more Spend less Net spending intention
30%
20%
10% 18% 21% 22% 20% 21%
9% 11% 12% 13% 14% 10%
0%
-11% -15%
-10% -19% -20% -22% -23%
-29% -29% -26%
-34% -37%
-20%
-30%
-40%
Grocery Improving Children and Holidays Beauty and Health and Technology Going out Clothing, Eating out "Big ticket
shopping home babies personal care wellbeing shoes, items"
accessories
Golden Quarter January 2021 | 51It’s not about trading down, it’s about buying less
Grocery Clothing Holiday travel
28% Waste less 31% Buy fewer items 26% Won’t go on holiday
25% Buy more special offers 27% Shop less often 24% Wait till pandemic is clearer
24% Shop around more 21% Buy more in the sales 15% Travel in UK instead of abroad
24% Buy more own label 12% Buy second hand 12% Look out for promotions
28% Will not cut back 23% Will not cut back 17% Will not change plans
Key: Do less Trade down Switch
Golden Quarter January 2021 | 52How big will the bounceback be in 2021?
Source: GlobalData
YoY % market growth, total
2019-20 2020-21
19.9%
12.7% 12.3%
9.1%
3.9% 3.9% 4.3% 5.4%
-0.9% -3.6% -5.0%
-13.1%
-17.7%
-27.4%
Food & Grocery Electricals DIY & Gardening Homewares Furniture
Furniture&& Health & Beauty Clothing & Footwear
Florcoverings
Floor coverings
Stabilise Boom? Bounceback?
Golden Quarter January 2021 | 53Will shoppers return to stores?
Source: GlobalData
YoY % market growth in-store YoY % market growth online
2019-20 2020-21 2019-20 2020-21
91%
40% 40% 44%
38%
30%
28% 31% 21% 23%
14% 13% 14%
7% 10% 8% 10%
2% 3%
-4% -1%
-14% -10%
-16%
-23% -24%
-37%
-51%
Food & Electricals DIY & Homewares Furniture
Furniture && Health & Clothing & Food & Electricals DIY & Homewares Furniture &&
Furniture Health & Clothing &
Grocery Gardening Floor coverings
Florcoverings Beauty Footwear Grocery Gardening Floor coverings Beauty
Florcoverings Footwear
Golden Quarter January 2021 | 54Local and independents playing a bigger role post-COVID
Thinking about the below activities as a result of the pandemic, how has
your behaviour changed compared to “normal” times? Source: PwC Consumer Survey, December 2020
80%
Sticky behaviour Buy more from smaller businesses
75% instead of big brands
Will do this when things get back to
70% Buy more from local high
65% street store
Shop more online for non-groceries
60% Spend more on improving my home
Spend less on clothing and footwear
normal
55%
50%
Spend more on my pets Shop more online for groceries
45% Buy essential goods in larger
quantities / stock-up
40%
Delay / avoid booking a holiday
35%
Order more from food delivery services
30%
50% 55% 60% 65% 70% 75% 80%
Did this during the pandemic
Golden Quarter January 2021 | 55But what does this mean for retail overall?
Evolution of the store Doing the right thing Investments and
partnerships
• Integral to shopping journey • Not just for Christmas, or in a • Local, national or global
• Pent-up demand post- pandemic champion – where are you
lockdown(s) • Recognise, reward and going to play?
• Multichannel comes into its own develop your people • What is your platform to win?
• More to be done to • Retailers’ role in society • Can you build resilience?
integrate and optimise • Year of inflexion for ESG
channels and Net Zero?
• How to measure importance • Customers may or may not • Don’t have to do it on your own
• Not just P&L reward you for it… but at least
they won’t punish you
• Value to customer
Golden Quarter January 2021 | 56Question 3 What are the top 3 things on the minds of retailers in 2021? Golden Quarter January 2021 | 57
Property as we return to business For more information on this topic, please visit our Real Assets homepage. Golden Quarter
Landlords are also feeling the pain
The landlords’ perspective
• Landlord pain – lenders likely to start to be more active in
negotiations
• Landlord approach – remains ‘not here to support wealth transfer’
• Rent Collections – many court proceedings expected to log-jam
the system
• Valuations now NOI driven
– Turnover rents less concerning but at the right levels
– Recovery of service charge and reduction in voids a powerful tool
• Impact of Insurance – Supreme Court ruling on ‘pandemic’ clauses’
for hospitality (except reduction in consumer demand and the
government’s actions)
CoStar, Retail National Report, 18/01/2021
Golden Quarter January 2021 | 59With March 2021 rent date fast approaching… Are we approaching the last landlord negotiation? • March & April are key months – need for pragmatism and clarity of approach • Moratorium – currently looks like the lease moratorium won’t get extended...business rates may be, potentially, but awaiting the Budget • Get the backstop in place – CVA / pre-pack is still very much live, as is the new Director Called Insolvency Moratorium • Know your power as a driver of footfall / demand. Partnering in the future to: – Move units – Shrink units – Get access Golden Quarter January 2021 | 60
How can you help fund your re-opening?
• Is S&L an option to help cashflow?
“Ted Baker has struck a £79m sale and leaseback of its London head office”
• Are regears back on the table? (Mar ‘20)
• Can you amend terms of existing S&L?
• Use of Asset Backed Contributions to fill “Next has secured the £107 million sale and leaseback of a warehouse
the pension gap complex in West Yorkshire” (May ‘20)
Note: Make sure you mitigate and defer “Asda’s new owners are preparing to sell and lease back the supermarket’s
property taxes where relevant distribution centre network for up to a reported £1.2bn” (Dec ‘20)
“H&M has been transferring many of its leases to turnover-based rent…
However, many leases are still on contracted rents, and even in turnover
cases have a base rent” (Nov ‘20)
“John Lewis to build rental homes at 20 of its UK sites...Retailer’s plan is part
of strategy to rebuild profits to £400m within five years” (Oct ‘20)
Golden Quarter January 2021 | 61Are you ready for the opportunities...
Freehold vs Leasehold
“Epiris announces acquisition of Bella Italia, Café Rouge and Las Iguanas”
• Have you or your shareholders got (Jul ‘20).
capital to buy-back property at 10%?
“Next has agreed a joint venture deal for the Victoria’s Secret UK
Mitigating the impact of enhanced business...Victoria’s Secret UK collapsed into administration in June, putting
online sales more than 800 jobs at risk” (Sep ‘20).
• Repurpose underutilised space
• Enabling click & collect “Supermarket giant Asda is set for a significant overhaul that will mimic
department stores by hiring out large parts of its shops to other businesses”
(Oct ‘20).
Planning for buy-side distress
• Are you able to move at pace?
• Do you know what you want?
• How would you integrate?
Golden Quarter January 2021 | 62Digital models Golden Quarter December 2020 | 63
We’re seeing the emergence, convergence and acceleration
of digital models Platforms
Primary
Resale
market
market
places
places
Operating model
Subscription
Vertically integrated
D2C Aggregators of
Offprice 3rd party brands
Monobrand Multi-brand
Customer proposition
Golden Quarter January 2021 | 64What should be in your top 20 digital metrics?
Customer journey
Attract Inspire Convert Retain Engage
1. Traffic 6. Average time 9. Check out 14. Retention 16. Awareness
on site completion rate
2. Traffic mix 15. CLTV 17. Affinity
(organic vs paid) 7. Pages views 10. Conversion
per visit 18. Loyalty
3. Search rankings 11. Number of
8. Bounce rate orders 19. Advocacy
4. Marketing spend
% sales 12. AOV 20. Social media
engagement
5. Marketing mix 13. CPA
(brand vs
performance)
Golden Quarter January 2021 | 65Some key learnings from assessing digital models
Driving more effective Unlocking customer Scaling technology
performance marketing lifetime value capabilities
Golden Quarter January 2021 | 66Appendices Golden Quarter January 2021 | 67
Overview of Christmas trading results
Source: Company trading statements
Overview of Christmas trading results, 2020
169.0%
135.0%
67.2%
60% Fashion
51.0%
50% General merchandise
40.0%
40% 36.0% Grocery and food
32.0%
30% 25.5% Note: shading indicates
21.1% 19.9%
19.0% 17.9% “high total sales rather than LfL
20% teens” 16.9% 15.7%
11.7% 11.0% 10.8% 10.6%
9.3% 8.6% 8.1% 8.0% 7.7%
10% 5.0%
2.6%
0.3%
0%
(1.1%) (4.3%)
(10%) (8.3%)
(8.9%)
(11.5%)
(20%)
(18.9%)
(24.1%)
(30%) (27.2%)
(30.0%)
(33.0%)
(40%)
(38.1%) (66.4%)
Golden Quarter January 2021 | 68Consumer sentiment by region
Thinking about your disposable income, in the next 12 months do you
Source: PwC Consumer Sentiment Survey, January 2021
expect that your household will be...?
30%
20%
26% 26% 24% 26% 24% 24%
10% 22% 21% 22% 20% 19%
17%
0%
-10%
-26% -28% -27% -27% -28% -25%
-29% -28% -29% -30% -31% -30%
-20%
-30%
Better off than last year Worse off than last year Balance
-40%
North West London West Midlands Northern Scotland Wales East Midlands North East South West East of South East Yorkshire and
Ireland England the Humber
Golden Quarter January 2021 | 69Consumer sentiment in lockdown 1.0 vs 3.0 by region
Thinking about your disposable income, in the next 12 months do you
Source: PwC Consumer Sentiment Survey, January 2021
expect that your household will be...?
5%
-5%
-15%
-25%
-35%
Mar 20 Jan 21
-45%
North West London West Northern Scotland Wales East Midlands North East South West East of South East Yorkshire and
Midlands Ireland England the Humber
Golden Quarter January 2021 | 70Christmas spending by region
Compared to last year, how much did you spend on Christmas shopping and
Source: PwC Consumer Survey, December 2020
celebrations this year?
42%
32% 34%
20% 25% 26% 21% 20% 24%
16% 19% 18%
-27% -21% -26%
-33% -30% -33% -31% -31% -31%
-43% -38% -40%
Northern Scotland North East Yorkshire and West Wales London East Midlands North West South West South East East of
Ireland Humberside Midlands England
More than last year Less than last year
Average
spend £496 £484 £400 £393 £360 £434 £374 £341 £438 £317 £364 £326
Golden Quarter January 2021 | 71Christmas shopping channels by region
Source: PwC Consumer Survey, December 2020
Proportion of spend online vs in-store
100% 5% 5%
9% 6% 8% 9% 9% 9% 7% 10% 7%
13%
90%
80%
70% 47%
68% 63% 59% 52%
60% 69% 67% 64% 63% 63% 59%
68%
50%
40%
30%
47%
20% 38%
28% 28% 28% 33% 33%
23% 25% 26% 27% 27%
10%
0%
West Midlands Wales Yorkshire and North West East Midlands South East East of London Scotland South West North East Northern
Humberside England Ireland
In-store Online / home delivery Online / click & collect
Golden Quarter January 2021 | 72Christmas shopping: sustainability considerations
% of respondents who considered sustainability / environmental factors in
Source: PwC Consumer Survey, December 2020
their Christmas shopping
Top 3 factors considered:
• Buying sustainable / eco-conscious gifts 37%
• Buying from a charity shop 26%
• Gifting homemade presents 26%
61%
55%
48%
41%
35%
29% 29%
Total 18-24 25-34 35-44 45-54 55-64 65+
Golden Quarter January 2021 | 73When will things get back to normal – by region?
Thinking about the restrictions due to COVID-19, when do you think things
will get back to “normal”? Source: PwC Consumer Survey, December 2020
20% 16%
26% 28% 24% 26% 28% 24% 27%
30% 32%
10% 36%
11%
12% 11% 8% 15%
9% 12%
12% 16%
15%
27% 12%
24% 44%
28% 36% 39%
27% 29% 35% 37%
23% 28%
43% 38% 35% 31% 30% 29% 28% 28% 27% 26% 25% 24%
West Midlands Scotland London East of North East East Midlands Yorkshire and Wales South East Northern North West South West
England Humberside Ireland
By summer 2021 By autumn 2021 By Christmas 2021 Not until 2022 or later
Golden Quarter January 2021 | 74Outlook for beauty:
Self-care and health integral to the future of beauty
What we’ve seen Bounceback Future
1. Health and wellbeing, with 1. Led by the eyes 1. Shift from colour and
focus on care fragrance to self care
2. Continued focus on natural and skincare
2. Rise of natural, eco-ethical and brands with purpose
and cruelty-free 2. Digital is now mainstream
3. Return to salons for the
3. Focus on simplicity “natural look” 3. Role of the store evolves with
use of technology, even QR /
4. Digitalisation, with one-on-one VR / AR touchpoints?
consultations
Golden Quarter January 2021 | 75Cutting back in grocery:
Discounters won’t benefit as much as in the last recession
How do you think your grocery shopping habits will change over the
Source: PwC Consumer Survey, December 2020
next 12 months?
28% 28%
25%
24% 24%
% of respondents
17%
16% 15%
12%
Waste less Buy more products Shop around more Buy more own Buy fewer items Buy more from Use a cheaper Use a cheaper Will not cut back
on special offer/ for cheaper prices label cheaper ranges/ store for some store for all
promotion brands shopping shopping
Key: Do less Trade down Switch
Golden Quarter January 2021 | 76Cutting back in fashion:
Fashion demand will remain muted in 2021
How do you think your clothes shopping habits will change over the
Source: PwC Consumer Survey, December 2020
next 12 months?
31%
27%
% of respondents
23%
21%
12% 11%
10%
8%
6% 5% 4%
Buy fewer items Shop less often Buy more sales Buy second Research Buy in discount Buy cheaper Buy smaller Stop going Use clothing Will not cut
items hand online before stores options in the items clothes subscription back
shopping in same stores shopping services
store
Key: Do less Trade down Switch
Golden Quarter January 2021 | 77Thank you pwc.com © 2021 PwC. All rights reserved. Not for further distribution without the permission of PwC. “PwC” refers to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL), or, as the context requires, individual member firms of the PwC network. Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions of any other member firm nor can it control the exercise of another member firm’s professional judgment or bind another member firm or PwCIL in any way. RITM4464597
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