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Open All Hours: The Impact of COVID-19 on the Retail Industry and its Future


Expert analysis from David Fitzsimons, Former Founder and Group CEO, Retail Excellence. This article has been written exclusively for IoD Ireland members.

The last two months have been somewhat surreal from an economic and specifically retail industry perspective. I guess I saw the first of the impact of COVID-19 on 28th February up close and personal as I enjoyed lunch with my wife in the Timeout Market in Lisbon. I watched on as delivery vehicles arrived and drivers with facemasks and gloves dropped off produce. When I got back to Ireland, I started to inform myself of what was coming and did try and alert Government as to the impact of COVID-19 on our economy.

Over the past number of weeks both I and the team have worked tirelessly to support our 2,100 retail member companies. We have faced a tsunami of phone calls and emails regarding essential versus non-essential retail, social welfare, the equity of who is open and trading and who is not, recovery measures required and how best to reopen safely.

A Hierarchy of Pain: The Impact on Retail

It was clear from the start of the COVID-19 emergency that there is a hierarchy of pain being felt in retail. Worst impacted are the visitor facing businesses who potentially will not see a return to any form of economic activity until Saint Patrick’s Day 2021. Anyone who retails seasonal stock, such as fashion, has been significantly impacted as their supply of stock has remained unchanged, but their opportunity to retail the product has reduced bar some online opportunities. This has led some of the larger operators having to rent additional warehouse capacity to simply store the stock and await reopening.

It is very important to point out that while some sectors remained open over the period, nobody enjoyed it and many suffered significant losses. By way of example, most grocery operators are at best breaking even at present. Yes, they witnessed increased volumes but they had to invest heavily in additional labour to sanitise stores and keep the shelves stocked. Other retail sectors have also been impacted. Irish forecourt was at the peak of the pandemic suffering an 80% erosion in fuel volumes, while Irish pharmacy suffered 55% declines in overall business revenues. That said, they all remained open and traded through a pandemic, something none of them ever wanted to do. They simply served their nation and for that we should be most grateful to them. 

The Change in Direction of Footfall

So, as we look to the future, we are facing an inevitable recession. That said, we will also witness some other monumental shifts that will reshape retail forever. One such shift is the significant move to home working. While most workers will return to their offices in time, a proportion will not. This in turn will lead to a permanent erosion in footfall in major urban areas and a likely increase in footfall and consumer activity in suburban and commuter towns. The shopping behaviours of these home workers will also fundamentally change. They will become more connected to the local towns and places where they live, they will spend more money in these towns whereas, before, they spent in their old places of work. They will also shop much more online with their favourite retail brands. They won’t pass the door of these retailers anymore yet will continue to shop with them, but this time they will shop online.  

Visitor dependent micro economies will fare the worst. If you look at the likes of Paris, Venice and Florence today, retail sales across the board have imploded. Thousands of jobs have been lost and the outlook is at best challenging. We hosted a recent webinar with Kerry County Council and Kerry businesses. Kerry County Council have conducted an economic impact assessment of COVID-19. It found that their economy will contract by €1b in 2020 alone. Furthermore, 25% of their economy has been lost and it will take several years to build it back up. 

The Further Growth of Online Shopping

Online will also see some monumental changes. Obviously, online shopping activity will increase exponentially forever. We have probably witnessed online revenue growth which otherwise would have taken five years happen in just two months. Retail and shopping are the world’s favourite hobby and pastime. What was a very experiential, tactile and social activity will, in the short-term, be anything but. It will be functional and emotionless. Retailers will self-inflict revenue declines on themselves as they reopen and implement rigorous health and safety measures. There will maximum capacity levels in stores and product categories that we once used to browse will no longer be browsable. Thus, if this amazing retail experience is no longer, consumers will not have as many reasons to shop in store. Instead, they will turn to online until such time that it is safe for retailers to offer those immersive experiences again.

The Phases of Reopening

As we prepare to reopen, we will soon experience two distinct economic phases. Phase one is the ‘pent-up demand phase’. In many sectors, the customer exits hibernation and comes to a store with a shopping list of things to buy. Conversion rates are 100% and basket values are through the roof. Hardware, DIY and garden experienced this a few weeks ago and the queues into these stores remain today. Other sectors reopening will soon experience the same, such as Fashion, Homewares, Footwear etc. Jewellery will also see some pent-up demand, but predominately around repairs. Obviously, some sectors of retail with not enjoy the pent-up demand phase. As a local café reopens, we won’t be buying a hundred americanos! After this comes the second phase, the ‘subdued demand phase’. Having bought necessary items, Irish consumers will then re-hibernate. They will demonstrate great financial, and health and safety prudence. It is at this point that recovery commences. I have listened to many economic experts in recent weeks and the one whose economic predictions resonate most with me is Jim Power. He does not concur with the letters in the alphabet, he predicts a recovery akin to the Nike swish. An initial significant decline followed by a gradual and prolonged period of recovery.

In recent weeks, we have been very busy actively lobbying the Government. Early into the crisis, Retail Excellence launched our recovery plan with five distinct pillars – a commercial rent grant, a 12 months local authority rates waiver, a gift card initiative to reactivate the economy, a reemployment measure to motivate employers to take as many colleagues back into employment as possible and a liquidity measure to sustain business and specifically retail.

Also, during the last few weeks, we have been working on a recovery plan with John Moran, the ex-Secretary General of the Department of Finance. John’s economic recovery thesis is a two-step plan and it is fundamentally grounded in common sense. Step one provides for all businesses to be lent money to sustain themselves at 0% interest. With this loan, businesses pay their suppliers, their rates, their rent. Thus, the necessity for a rates waiver, rent grant and such like to be removed. The economy functions and cash is transferred between debtors and creditors. Step two involves an arm of the State, such as the Revenue, establishing a COVID-19 compensation scheme. Business owners make a compensation claim for losses sustained as a result of the emergency. Having been paid their compensation, the business simply pays back their loan. Such a solution allows the economy to function and is probably the most effective and speedy route to a full recovery.

The New Normal

As retailers reopen their doors, they will face colleagues and customers who are somewhat scared and concerned. Retailers will need to reassure everyone that everything is safe and, as responsible employers, they are reopening in full compliance with the HSA guidelines. This will include having distancing measures in place, queuing systems with a queue manager, disinfectant protocols for products touched but not bought, maximum customer capacity levels, and, in some cases, maximum dwell times allowed. This is the new normal. This new normal is very much at odds with what the majority of retailers got into the retail industry to achieve. They ventured into retail to offer consumers exceptional experiences, to enhance dwell time, to maximise capacity, to deliver brilliant colleague work environments, and to make a profit. For the time being, all these aspirations are no longer valid.

A Look to the Future

As we look towards a somewhat uncertain future, a number of matters are very clear. As retail business owners, we need to very quickly realign projected P&Ls to take account of the new normal. According to 360 retail CEOs, whom Retail Excellence recently surveyed, likely revenues will decline by 30% in 2020 and 20% in 2021, and that includes the factoring in of some very significant online growth. It is an unpredictable and challenging outlook and certainly one that will require monumental Government support. Without such support as an industry, retail will lose over 100,000 colleagues to long-term unemployment. Big decisions are being made by CEOs today, and without fit for purpose Government action, those decisions will be set in the context of a somewhat challenged economic outlook.

COVID-19 has caused us all to rethink what is important in our daily lives. In that context in recent weeks I have informed the Board of Retail Excellence of my decision to resign from my role as Group Chief Executive. It is a difficult decision, but the correct one. It was a hard thing to do as the Board have been so supportive of me over the years. That said, after 25 years at the helm of Ireland’s largest retail representative body the time has come for a new leader to be appointed. Whoever that is, I wish them all the very best. I have thoroughly enjoyed working with so many ingenious and passionate retailers over the years. A few weeks off awaits and then on to the next chapter of my professional life.