Those of us living in city centres during the coronavirus crisis are a little ahead of everyone else in the country. As you take your government-mandated walk outside once a day, and stroll down the high streets that criss-cross the country, you’re looking into the future. Empty, desolate, and quiet, it could be an augur for what is to come.
“It won’t be the end, but I think there’ll certainly be a number of stores that won’t be opening again,” says retail analyst Richard Hyman. He believes that coronavirus has pushed the fast-forward button on major shifts in the world of retail that have been going on for the better part of a decade. “There has been an unstoppable expansion of capacity, and the growth of capacity has exceeded the growth in demand,” he explains. “There are a lot of fundamental questions around trading economics and the extent to which you can make money from retailing.”
Long before there’s even a timescale to end the economic shutdown in the country, we’re already seeing the first hints of what’s to come. Intu, which operates many of the country’s major shopping centres, received only 29 per cent of the rent it was due for the second quarter of 2020 — compared to 77 per cent this time last year. Retail park developer Hammerson fared little better, with 35 per cent of due rent paid. Landsec, which has a mixed range of commercial property countrywide, including retail, usually gets 96 per cent of tenants paying on time. This year, it was 65 per cent. Ailing department store Debenhams appointed administrators on April 9 to restructure its 142 stores worldwide, following Cath Kidston and rent-to-own firm BrightHouse into insolvency.
That in itself isn’t solely down to the coronavirus, reckons retail analyst Graham Soult. “All these businesses like Debenhams and Cath Kidston that have gone pop so far, would have gone pop anyway,” he says. “All that’s happened from the point of view of those businesses was they were teetering on the edge and coronavirus has given them an almighty push.” What Soult worries about is when other businesses that are otherwise solid topple over the edge.
Measures that the government has introduced, including paying 80 per cent of the salary of staff who have been furloughed, and scrapping business rates for the next year, have offered a modicum of security for businesses on a firm footing that might have tripped up due to the coronavirus. But the crisis poses key questions for all of retail. “When we come back, there’s not going to be any business in a better position than they would have been otherwise,” says Soult. “It’s a question of trying to freeze things rather than having all these businesses in complete decay during the process.”
“I know that these are challenging and uncertain times, in particular for retail businesses and staff across the country,” wrote business secretary Alok Sharma in a letter to the retail industry on April 8. So what can we as the British public do to shore up our shops? Should we be buying online to ensure some retailers retain an element of cash coming in — or does that do more damage than good? The government seems to think online shopping is a useful way to prop up the sector. In his letter, Sharma wrote that he “has always been clear that online retail can continue to operate and is encouraged”.
Yet there’s a moral question that causes some people to pause. Simply buying everything from retailers who have managed to retain, enhance or create online shopping experiences isn’t a simple solution. In fact, it could be causing more harm than good. Some retailers, including Next and River Island, have shut down their online shops, placing the businesses in stasis until lockdown is lifted. They’ve done so in part because online retail is costly for businesses. “Retail logistics were designed with only forward gears, because no one really foresaw that online was going to become the size it has,” says Hyman. Despite what may seem obvious, selling a product in a shop is cheaper than doing so online. That’s in large part because of the high return rates – up to 40 percent – of items bought online. “It’s a huge cost,” says Hyman, and one that could contribute to a company’s woes rather than help them.
There’s also the human cost. Every online retailer that stays open has a staff of contractors and employees who remain in work, often in cramped conditions in factories that can become hotbeds of infection during the time of a pandemic. One employee at Asos’s Barnsley warehouse, which has remained open despite the coronavirus explained they were hugely worried about the risk of catching coronavirus. “In that warehouse it doesn’t matter about social distancing,” they say. “If one person gets the virus, we all get it.” Up to 2,000 people can work in the warehouse at one time, and the worker – who asked not to be named – said that the social distancing measures the business has put in place are not being followed.
Barnsley Metropolitan Borough Council visited the Asos facility in late March, and signed off on the safety of the workers – though staff there say the visit on a Friday morning coincided with a lull in the factory.
According to the worker, pickers at the warehouse are dealing with an order well of 2.2 million items – a huge amount compared to normal. “Before this started the well was on average 121,000,” the employee says. Within the first two days of lockdown, the worker claims, Asos introduced a 50 per cent off sale that bumped up the order well to a million, then increased sale items further. To deal with the high demand, Asos have been offering overtime to staff. They’ve also been paying workers an extra £20 a day, on top of the roughly £80 a day before tax they receive for a day’s work, to come in – what the worker calls “a handgrab” to stop people staying at home in self-isolation “and to tempt people to come back to work quickly”. “We think that is bang out of order,” the factory worker says.
XPO, the company behind the factory, and Asos sent a letter to employees in late March saying that employees who didn’t want to work would not be eligible for furloughing. “This is a government measure to protect employment when there is no work,” the letter explained. “There is work in this facility.” Instead, employees would have to go on statutory sick pay, receiving £95 a week. The worker also shared photographs from inside the factory building showing that fire doors had been left open as recently as last week, claiming that bosses at the factory did so to try and limit the spread of coronavirus – something the company denies.
An Asos spokesperson refuted the allegations, saying “they are false and do nothing more than serve to create panic and hysteria in an already uncertain time.” The spokesperson added the firm was working with officials at all levels to strike the right balance between keeping its warehouse open and ensuring employee safety.
Workers at Asos’s Barnsley factory aren’t alone in worrying about the impact business as usual is having on their health. A picker and packer at Marks and Spencer’s Donnington distribution centre – which disburses clothing and household items – also says staff there have been mistreated. One worker, who again asked for their name not to be used in this story for fear of retribution, said they were called “a hypochondriac” by one manager for voicing concerns at the start of the outbreak. Workers were given written statements from management at the beginning of each shift telling them to be aware of symptoms, the worker claims – which they say is “the bare minimum” they should have been told.
“We were told to practice social distancing even though we all took our breaks together and even though there were hundreds of us working at the same time,” they say. “Furlough has never been mentioned and has never been an option.” Workers were sent a letter by the factory’s operations director stating they were key workers which, the picker and packer claims, they were told to keep in case they were stopped by the police on the way to work.
The worker admits that efforts have been made to stagger breaks and staff leaving the site to more evenly distance them, as well as more hand sanitiser being offered, “but our workforce is too large and we are busier than ever,” they claim. “It’s an awful situation. I cry going to work and I cry going home, especially as the work I do is worthless. I packed candles yesterday.” A Marks and Spencer spokesperson says the company was following expert guidance and had put in place social distancing and hygiene measures. The spokesperson adds that the government guidance “encourages online shopping” at a time when many services are off limits.
Public pressure has caused some shops to stop online trading – but it’s a difficult balance to reach. Online shopping is a lifeline for many who aren’t able to get out, but non-essential items aren’t always needed. However, for retailers who are struggling, it makes sense to continue. “If you ask any business whether they would rather have no cash now and more cash later, or a steady flow throughout, most would say they’d rather have it steady,” says Soult. And that’s even more important when we do eventually return back to some semblance of normality.
“When things do go back, consumers are going to have high debt, they’re going to feel insecure, and I think it will also help to change priorities,” says Hyman. “Exactly what that looks remains to be seen. It hasn’t peaked yet, but I think that a lot of what we buy we don’t need. We’re persuaded to want. I think that element of spending is the bit that is vulnerable.” And that could be bad news for even more swathes of the British retail sector.
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