The High Street’s last stand: Black Friday and Christmas shopping during COVID-19
Covid-19 has had a monumental impact on our lives, changing the way we work, socialise and shop. This article is concerned with the last of those three, examining the impact of Covid-19 on retail shopping and the importance of Black Friday and Christmas in the sustainability of a competitive retail sector. Whilst Amazon and other online retailers are expected to rake in record-breaking profits, most physical shops are waiting precariously to learn whether the most important shopping period of the year will be profitable enough for them to survive the pandemic.
The Pinnacle of shopping
Ever since Black Friday made a successful transition into the UK market, the period between the end of November until early January has become the retail sector’s most important trading period of the year. The combination of Black Friday and Christmas has meant that billions are spent each year on the search of the best bargain for the former and the best gifts for the latter. Over the 2019 Black Friday weekend, more than £8.5bn was spent in the UK alone. This amounted to almost a tripling of the average daily retail spending over those 3 days, showcasing how significant this period is for retailers.
Black Friday is the busiest in-store shopping day across both the UK and the US. Last year shops in the US hosted more than 85 million shoppers, far surpassing any other day in terms of both footfall and spending. The same applies to the UK, with London being widely known as a centre for retail shopping, especially in the category of clothing and footwear. Oxford Street’s Christmas decorations alone usually pull in millions of tourists, who end up spending significant sums in the surrounding shops.
Online shopping has been a significant part of the Black Friday shopping experience. More and more shopping has moved online, but until last year most spending remained offline. Online shopping has been increasing and accounted for 44% of all UK Black Friday spending last year. This was also observed in other countries, with studies in the US finding that the majority of shoppers shopped both in-stores and online in 2019. Retailers considered this as a favourable trend for them, as they did not have to stretch their capacity and overburden themselves with stock to respond to the growing consumer appetite in the Black Friday weekend, making this period even more profitable for them.
Covid-19 forces shoppers to move online
The most significant shopping period of the year will be very different for the over 300,000 UK retail outlets in 2020. Lockdowns and fear of public places have decimated consumer appetite for physical shopping. Spending, in general, has suffered as many people remain in furlough schemes and with reduced incomes. PwC expects that the total Black Friday spending for this year will only amount to £6.2bn, 20% less than in 2019.
Non-food shops were forced to close down in the spring and again during the second lockdown in November. During the spring, sales of non-food product groups decreased substantially, with sales of clothes and footwear experiencing the steepest decline (76.8% fall between February and April). Spending recovered once lockdowns eased, but this was largely driven by online sales rather than physical shops in the high street. According to the Office for National Statistics, online sales rose by 52% since February, whilst at the same time spending in physical shops decreased and hundreds of shops around the country have already closed down.
The November lockdown is scheduled to end on the 2nd of December 2020, but uncertainty remains and some of the shops that closed down might not open again. High-profile casualties that have initiated insolvency procedures include Harris Tweed, Peacocks, J-Crew and Victoria’s Secret. Alongside them, a huge number of local, family-owned shops are struggling and missing out on the Black Friday spending will likely be the final blow for many of them. In contrast, the biggest struggle for online retailers is keeping up with the increased demand.
Is there hope for physical shops?
The extension of the furlough scheme through the 2nd lockdown and beyond might prove to be a lifesaver for many small shops, but this might not be adequate to replace the loss of the Black Friday revenue. A significant difference between the 1st and 2nd lockdown for retailers is that click and collect services are now allowed. This will enable many small businesses to continue operating during the Black Friday weekend, albeit on a much smaller scale. Yet, an effective click and collect service requires that a retailer has some online presence, which is not feasible or affordable for all retailers.
In Germany, the government will reimburse small companies with up to 75% of their November 2019 takings, replenishing the lost Black Friday revenue through direct government grants. In the US, talks over a new financial relief package have stalled, but there is still hope that a resolution will be reached in time to send all US citizens new stimulus cheques before Christmas. The hope is that these cheques will be used almost immediately to fund the purchase of Christmas gifts from retailers. Campaigns to encourage people to shop locally have arisen in numerous countries, including the UK, Italy, and Spain, as governments seek to protect small retailers. In Belgium and Wales, essential shops are prevented from selling non-essential goods for the duration of their lockdowns, in a bid to level the playing field for the non-essential retailers forced to close down.
The French government has adopted a more novel solution to preserve the competitiveness of its retail sector and protect physical shops. Their 2nd lockdown is expected to last until the 1st of December 2020, the Tuesday after the Black Friday weekend. Non-essential retailers would have been forced to be closed during the most profitable period of the year, channelling all the Black Friday demand to Amazon and other online retailers. Faced with significant pressure from small retailers and the need to abide by the principles of equal treatment and non-discrimination, the French government decided to delay the nation’s Black Friday sales until the weekend after their lockdown ends. This will allow physical shops to earn their share from the Black Friday spending.
With Covid-19 going strong and the wide-spread distribution of a vaccine not expected to take place until at least mid-2021, the future for many high street shops looks bleak. The increased safety and convenience offered by online retailers means there might never be a return to the pre-pandemic shopping strolls that physical shops so heavily relied on, whilst the move towards online shopping and the general fall in consumer spending in 2020 may cause many retailers to shut down permanently. For consumers, this means less choices and more online shopping. As for lawyers, more insolvency proceedings are on the horizon in what is likely to be an in-demand sector in the legal industry for 2020 and 2021.