Much has already been said about what people will desire of their daily life and work patterns in a post-Covid world. A fundamental part of many people’s lives is how they shop; there is little doubt that this will evolve, the question posed but as yet now wholly unanswered is what the impact of these changes will be?
Lockdown has accelerated the rise of online shopping, especially in sectors previously dominated by physical retail, such as grocery. The share of the grocery sector market being serviced by online deliveries has more than doubled, and many people have found the convenience (and reduced health risk) of an online weekly shop a bit of a revelation. I am a strong believer that technology will automate a significant share of the grocery sector to online fulfilment, particularly for highly predictable product flows (and yes, that includes toilet rolls!), The visit to the local supermarket will be mainly focused on fresh ingredient selection and top-up shopping to complement the basics arriving on schedule.
The challenge becomes our relative interpretation of the term “convenience”. In a pre-Covid environment, “convenience” was principally: the nearest shop. For most customer segments, this was the dominant driver of store choice, eclipsed by price for a smaller number of customers. For the vast majority (c. 95%), having to be in for a specific delivery slot for online shopping was actually less convenient than shopping whenever we felt like it, in person, at our closest shop or one on our daily commute. In our current lockdown model, where many are at home all day, the idea of a pre-picked and packed weekly grocery shop arriving at the “click of a button” suddenly becomes very attractive on a relative measure of ”convenience”, with the alternative meaning long queues to access stores, social distancing rules and risk to our health.
The big question is: how much of this behaviour will remain in a post-lockdown world? For those of us who have been working from home and can continue to do so when restrictions are lifted, an online grocery shop will likely form an attractive and long-standing part of life. This should be a mutual benefit for grocery operators, given the demographic of these shoppers is likely to be higher earning professionals, with larger basket sizes. However, for those who are unable to flex their schedules to accommodate the online delivery windows (and the increased demand for them), it is more likely that a trip to the local supermarket will reinstate itself as the dominant form of grocery shopping (which, in reality, it still is for more than 75% of us, even during lockdown). The latter group includes in-store retail workers and importantly, key workers.
Beyond grocery, the shift to online across all categories will remain a feature for the years to come. Experience-led retail and specific, or event-driven shopping missions will become increasingly important to attract people to physical stores. We will likely see an increase in the consolidation of prime retail into a smaller number of locations, visited less often per capita, but servicing a larger catchment area. This is probably good news for prime, central-metropolitan retail and prime shopping centres, but bad news for the already-struggling secondary and tertiary shopping centre locations. Equally, outdoor retail parks, where maintenance and social distancing requirements may be easier to manage - therefore perceived to be a lower health risk - will likely continue their relatively strong performance since the coronavirus crisis, especially if these parks are anchored by a grocery store.
But what about the high street?
For those dodging the daily commute, but without the desire or capability to work effectively from home (think of the early-career generation living in a house share and working from the confines of their bedrooms, or, those of us needing a change of scene for our mental health and to avoid children stealing the show on video calls) the local high street may well become the new “office”. Could we see a booming return to the San Francisco culture of everyone working in their local coffee shops, hunkered over a laptop whilst chattering away on online meetings…? I’m not sure that would suit many of us, and the coffee shops would probably not appreciate hordes of remote workers with extended dwell times clogging up their socially-distanced seats, limiting their revenue, and piggybacking on their Wi-Fi. My guess is that to accommodate this need for more localised remote working, we need more flexible working spaces available closer to home. Could a rebirth of co-working be the saviour of the local High Street? This may solve two problems at once.
Prior to COVID-19 we already had a glut of struggling retail provision on many high streets. If this could be quickly, effectively and cheaply converted to appropriately-socially-distanced, flexible working space it could be revolutionary – something between a public library and a 1990’s internet café (albeit with 2 m cubicles rather than the typically cramped spaces of yesteryear).
COVID-19 could be the catalyst to transform the High Street into what many “place-makers” strive for; a place for life, work and recreation. The balance of the High Street would be dictated by local population requirements and their lifestyle patterns and missions, rather than a mix forced to suit the physical and economic constraints of the development space.
For retail occupiers, particularly in F&B, leisure, local grocery and food top-up shop missions, all of this should be good news, even after accounting for social-distancing measures. There will be a greater desire to support local community connections forged during lockdown. The casualties of our traditional national retailers will lead to depressed high street leasing values. A preference for local provenance should lead to a wave of local innovative start-ups, serving their local communities throughout the extended dwell times that people now spend closer to home (but not at home).
Economic models may need to shift to cater to people who are now on their local high street throughout the day, but that should help cushion the short-term reduced density of consumption given social-distancing rules. We will need to see changes in how landlords and tenants share in and support this transition, albeit that the move to turnover rent is already well underway across asset classes. Ultimately the risk and reward will be shared by both parties, and these flexible partnerships between landlords and occupiers will encourage successful retail that can adapt if things aren’t working. This should help drive sustained occupancy and reduce voids on the high streets. Some landlords may not make the historic returns they have come to expect; however, they will have tenants (even if they aren’t retailers) and will be helping to make our high streets better for local communities.
The only possible threat to this utopia of ‘reinvigorated and revitalised high streets’ is technological disruption. We had already moved to a world where almost anything could be delivered at almost any time. Businesses like Deliveroo, Uber and JustEat are joined by new entrants and offers, expanding the growing ‘armchair economy’. The only defence is a local place to share in a sense of belonging; because when you’re on those daily video calls it doesn’t matter how stylish your bookshelf is, you are still sitting there alone.