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May 28, 2020

Reopening will be no mean feat for UK retailers

While clothing stores in the UK will be allowed to reopen from the middle of next month, one analyst says shops will not "spring back to life" on 15 June and notes there will be a number of teething problems as retailers begin to reopen their doors.

By Beth Wright

While clothing stores in the UK will be allowed to reopen from the middle of next month, one analyst says shops will not “spring back to life” on 15 June and notes there will be a number of teething problems as retailers begin to reopen their doors.

UK fashion retailers were this week given the green light to reopen next month by the government but it is unlikely all shops will reopen immediately as demand remains subdued, says data and analytics firm GlobalData.

Lead analyst Sofie Willmott says it is likely retailers will follow the lead of John Lewis which announced plans to open just two of its 50-strong store portfolio on 15 June – a move she says demonstrates that introducing stringent health and safety measures will not be easy, even for major players.

“Department stores will be particularly difficult to monitor given the size of the locations and although John Lewis plans to open an additional 11 stores later the same week, it has not yet given opening dates for the remaining 74% of its store estate, highlighting that it is proceeding with caution,” Willmott notes.

“Other retailers are likely to follow their lead and only open a small number of stores initially, both to gauge the consumer demand and to test their safety procedures. There will be teething problems as retailers find out which measures work and are adhered to by customers, but even if processes are generally successful, we are unlikely to see all shops reopening any time soon as demand remains subdued.”

Among the numerous challenges facing UK retailers as non-essential stores reopen are the high costs of implementing safety measures, the need to gain shoppers’ trust, and increased supply chain costs.

Meanwhile, Willmott adds although the government has sanctioned non-essential store openings from the middle of next month, overall retail capacity will remain below pre-crisis levels for the foreseeable future as social distancing in public spaces becomes the new normal.

“Retailers will also be concerned about driving up their costs if they cannot balance them with sales. With many store staff being placed on furlough leave and rents being negotiated with landlords, retailers will be wary of reopening too many stores too quickly if the demand does not warrant it.” 

Commenting to ITV News earlier this week, the CFO of Fraser’s Group — formerly Sports Direct — said the two-week delay in opening from a previously stated 1 June could mean the difference between a retailer sinking or surviving.

“There will be retailers that are on the edge of going out of existence, that an extra couple of weeks will put some under for sure because they are that close to the edge. It’s still going to cost us millions of pounds in lost sales and unnecessary costs for this lack of guidance. I think it will definitely put some businesses out of business. I think if you are a retailer that is living on the edge of your credit line and you’ve basically got no cash left, every day is essential.”

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