The implications of Covid-19 on the UK retail market are nothing short of severe, with retailers nationwide being instructed to shut up shop, therefore leading to a complete loss of income when it comes to their physical stores.

However, as we know, there are a number of retailers that have been categorised as ‘essential’ and therefore can remain open. But while these operators are still able to trade during lockdown, it appears as though they might not be totally immune to the challenges that Covid-19 is generating across the sector as a whole.

While it’s true that a number of essential retailers did benefit to an extent from the increased trade as the UK entered lockdown, there are number of factors that have started to come into play that mean these retailers are now facing new challenges that may start to impact turnovers and profits.  

The panic buying we saw at the onset of the crisis, particularly for grocery operators, did provide a strong boost to revenue. However, as this type of buying has subsided and retailers have to implement strict social distancing measures, we are starting to see in-store sales soften in some cases. For example, some grocery retailers are reporting weaker annual like-for-like sales in-store as social distancing means they can’t serve the same volume of people, with the additional costs associated with maintaining social distancing eating into margins.

Furthermore, as it becomes increasingly likely that we will be adhering to social distancing for some time, these challenges look set to continue potentially throughout the course of the year, not just for essential retailers but for others as they reopen once we come out of lockdown. 

In addition, some essential retailers have taken the decision to close stores in less populated areas or in lower footfall locations such as city centres and shopping centres, which inevitably exerts pressures on total sales performance and margins.

These underlying, yet significant, challenges can easily be overlooked, particularly in the face of the widespread closure of all other retail and leisure operators, and the fact that they are still able to trade can suggest to landlords that they are better placed to pay their rent. However, we have recently seen even essential retailers such as Boots withholding rent payments leading to understandable frustration amongst the landlord community.

While those essential retailers with an online offer are perhaps better placed to counter some of these challenges, they are without a doubt having to navigate their way through an exceptionally difficult period. Just because some stores are able to stay open does not mean that they are able to trade as normal, albeit these businesses are benefiting from a 12-month Business Rate holiday, VAT payment deferral and employee furloughing, which will have positive cashflow implications. This will understandably be frustrating for landlords, some of which are facing their own difficulties, but greater dialogue and transparency may help alleviate some of this frustration on both sides. Perhaps what this highlights is that it’s not just retailers who need Government support, so do landlords.  

Further information

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