KPMG/IPSOS: COVID-19 Obliterates Hopes Of Improved Retail Health

Following its latest health assessment, the KPMG/Ipsos Retail Think Tank (RTT) has determined that UK retail health worsened substantially – by 3 index points – in the first quarter of 2020, with the impact of COVID-19 being the key driver obliterating previous hopes of any recovery. This takes the RTT’s Retail Health Index (RHI) – a quantitative and qualitative assessment of demand, margin and cost – to 71, a new record low.

An even more seismic drop – by 9 index points, taking the RHI score to just 62 – is predicted in the coming (second) quarter, this would be greater than the drop recorded in the shadows of the 2008/09 financial crisis.  The RTT members do however, stress that the magnitude of this downward shift is highly dependent on the length and nature of the country’s current ‘lockdown’ restrictions, and the impact this has on consumer and business psyche. If the members’ future assessment comes to fruition, the health of retail will have fallen by 38 points since the think tank’s inception in 2006, when the index was originally based at an RHI score of 100.

First Quarter of 2020 – Reflection:

The RTT members had previously been ‘cautiously optimistic’ about the prospects for 2020, predicting that retail health would likely hold steady at 74 in the first quarter of the year. Indeed during the RTT’s assessment back in January this year, the members previously held high hopes for the reemergence of political and economic certainty following the conclusive General Election, which they believed would benefit the sector in subsequent quarters.

COVID-19 however, has quickly eclipsed even the sector’s previous woes, and with it any hopes of improved health for the foreseeable future. The nation’s lockdown, and its impact on demand in particular, has sealed the fate for many retailers, especially those deemed ‘non-essential’.

Reflecting upon health in the first quarter of 2020, Paul Martin, co-chair of the RTT and UK head of retail at KPMG, said:

“If looking at total sales in the UK over the first quarter of 2020, non-food retail was on a -1% trajectory in both January and February. However, from mid-March onwards, the decline was far more severe as anxiety around COVID-19 started to rapidly rise. The lockdown only came into effect on March 23rd, but non-food retail sales fell by anything from 50 to 100 per cent thereafter, dependent on whether the retailer in question had any stable online operations or not.

“The lack of consumer engagement was mirrored by footfall figures during the quarter too, which fell substantially as the health consequences of COVID-19 became clearer as the quarter progressed. A record decline in footfall of 14.2% was recorded in February, whilst that low was quickly superseded by a fall of 51.3% in March – and that only measured the footfall at stores which remained open.

“Grocery and online sales have soared though, especially towards the back-end of March as consumers started to stockpile despite calls not to. Despite this seemingly beneficial rise for ‘essential’ or online retailers, even this uptick wasn’t enough to offset the declines noted throughout the quarter and across the sector more broadly, as has been made painfully clear by recent retail sales figures.”

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Source : KPMG/Ipsos Retail Think Tank

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