Lockdown part two – the cost to retail
Working out the size of the hit to UK non-essential retail from lockdown is bound to be
inexact. But it’s worth doing anyway. Understanding what is at stake here needs to drive remedial action and potentially, investment in dealing with it. My analysis of numbers for November, and taking account of the likely transfer of demand to online, I estimate lost sales will be worth c£10bn.
Looking back to the first lockdown, my estimate of sales lost back then is c£13bn. So assuming we enter December with non-essential stores back open, the industry will have lost around £23 billion from Covid lockdowns.
Before anyone starts to think this sounds less bad than imagined, the numbers need to be viewed in context. There are no reliable averages for non-essential retail profitability but total sales across these sectors were worth £226bn last year. So the estimated loss is around 10% of that figure. This comfortably exceeds the average margin, which would have been closer to 5% than 10% last year.
Retail is a high fixed cost business. Unless companies have been able to materially reduce costs, profits will have been materially hit. And as I pointed out in my earlier Blog, retailers will be carrying stocks into 2021 on a scale never before seen.
Turning that stock into cash will be critical. And getting price, channel and store allocations, and promotions right will be essential pre-requisites of survival.
TPC has developed data science led machine learning to optimise inventory allocation. If anything here resonates and you would like to know more, do get in touch for an informal chat - firstname.lastname@example.org