city shoppingMonday, June 15, 2020 marked the advent of the UK edging back to normality with most high street retailers opening their doors for the first time since March. Media outlets published pictures of high streets flooded with queues of eager shoppers seemingly indicating that some consumer confidence had returned to the retail sector.

On that same day, I was joined by Ewan Venters, chief executive officer at Fortnum and Mason (Fortnum), and Matthew Lewis, partner and head of retail at Squire Patton Boggs, to find out if confidence really has been restored and to explore the challenges facing retail in ‘phase unlock’.

This post was inspired by my weekly webinar “Testing Time”, where I am joined by guests from all walks of the business world, as well as members of the Squire Patton Boggs global team, to discuss the UK’s economic recovery from the pandemic, and how COVID-19 has and continues to transform the already complex global environment and challenging governments, businesses and societies alike.

Founded in 1707, Fortnum is an iconic brand bursting with British heritage and is notorious in the international sphere for its bespoke tea blends, food and bone china. Ewan has grown the company threefold in the seven years since joining.

Listen to the discussions

How Will Retail Unlock?

Unsurprisingly, safety and confidence of the Fortnum’s team and its customers is of paramount importance to Ewan and the executive board (Board) as they navigate through ‘phase unlock’. Good communication lies at the heart of this with daily Board discussions as they endeavor to anticipate changes in government policy ensuring that the process of unlocking is a safe one.

Advance planning, training and webinars were critical to Fortnum’s relaunch to ensure that the safety and confidence of both customers and employees were restored. The staff manual was rebuilt and sent to the team, alongside a digital ‘look book’ of the store and face coverings. To address the issue of public transport, store opening times have been pushed back to 11:00 a.m. to ensure that no employee is required to travel during peak times.

With consumer spending accounting for two thirds of the UK economy, Matthew was unsurprised by Fortnum’s strong approach to ‘phase unlock’ commenting that confidence and safety were of paramount importance to ensure a successful relaunch of physical retail. Over the last couple of weeks, our team has been working with Retail Economics on two surveys and 50% of consumers in the survey agreed that limiting the number of people in stores was the most important factor in making them feel safe.

Should the government abandon the two meter rule? Ewan’s opinion is that the rule will significantly harm Fortnum’s business if it remains in place for an extended period of time, predicting that Fortnum would look to take only 50% of last year’s transactions for Q4 if the rule remains in place for this period.

Although the two meter rule seems to be at the forefront of clients’ minds, Matthew noted that the main concern remains keeping the ‘r;’ number as low as possible. The survey showed a clear 60/40 spilt between retailers that agree with government advice and those that don’t – confirming the concern of retailers that easing restrictions too soon may result in a second peak, a second lockdown and even further damage to the retail sector.

What factors lay behind accepting government funding? Fortnum is privately owned by Wittington Investments Limited, a financially strong shareholder. The decision was taken not to take part in the furlough scheme and to continue to pay staff their full salaries. From a reputational perspective, Ewan noted that it will be interesting to see which companies or individuals that, despite having wealth sufficient to wait out this storm, accepted government funding when they did not need to. Matthew Lewis agreed that there may be some issues in the future for retailers that accepted government assistance during the crisis that subsequently post significant profits, would there be pressure to repay taxpayer support?

The government funding schemes we have seen are certainly unprecedented but they will not prevent job losses as Matthew noted that redundancies in the next phase are inevitable.

Have there been any difficulties with the supply chain? Fortnum have escaped the supply chain disruption that has impacted much of the retail sector as they have an incredibly robust list of suppliers coupled with a strong merchandising and buying team. With 86% of products sold in Fortnum made in the UK and good forecasting and advance planning Fortnum has not lost a single supplier during the pandemic. However, a key challenge facing the Fortnum team is making the right call about levels of customer demand during phase unlock and this is when the agility of the supply chain will really be put to the test.

It has been far from plain sailing for the rest of the sector as retailers and suppliers have been hit pretty hard. Matthew emphasized that retailers should diversify their supply chain in order to cope with future scenarios whilst looking at risk management strategies and stress testing business continuity models.

Final thoughts… the recovery of the retail sector has started. However, ‘phase unlock’ is already presenting its challenges with confidence and safety forming a key part in the retail sector’s survival. Retail must adapt to a new set of circumstances to ensure consumers return to their stores.