Retailers focused on restoring profitability

Global Real Estate Perspective, August 2020

Many global retail markets are witnessing a rebound in sales as non-essential retail stores and leisure venues reopen and footfall gradually increases following the gradual easing of lockdown restrictions in many countries. However, some markets are currently experiencing an opposite trend, impacted by new or accelerating COVID-19 outbreaks.

Source: Google COVID-19 Community Mobility Reports

A return to a profitable retail business is the key focus for many operators. Various retailers have reported pent-up demand and high conversation rates in-store, allowing them to recover some of the lost sales, but this period of strong consumer demand may only be temporary. Ongoing social distancing measures will limit the recovery for some operators, including various foodservice companies and leisure operators, as well as retailers dealing with a high operational cost base or unsustainable levels of debt.

A longer-term perspective: Strengthening the omni-channel retail experience

While the current acceleration in structural change is a major challenge for the retail industry, the crisis presents an opportunity for relevant retail to become more resilient. Retailers will place a greater emphasis on creating stores with a unique offline offering and strengthening the omni-channel retail experience. This will require a review of the wider supply chain and distribution networks as well as the role of the physical store. For some retailers this will result in an overall reduction of physical stores, while others will focus on opening smaller stores while implementing click-and-collect and other fulfilment services across their portfolios. Retailer business models and use of physical space are also evolving, supported by an increased focus on technology in order to provide a more convenient and efficient shopping process.