During 2020, almost half of consumers (46%) made a new online purchase that they only previously made in-store.
Online sales in the retail sector saw five years of growth in just 12 months in 2020 as restriction and lockdowns have shifted consumer spending to online, and away from physical stores. Online sales accounted for 19% of retail spending in 2019, compared to 28% in 2020, as forecasted by Retail Economics.
Covid-19 has also reshaped consumer expectations and confidence, with nearly 2 in 5 consumers (36%) surveyed saying that their spending habits and the way they shop have changed permanently. The research also suggests there could be a strong bounce back in consumer spending as cancelled holidays, fewer nights out and less commuting boost discretionary spending power with one in ten expecting to spend more this year than in 2020.
The strength of the bounce back hinges on perceptions about the duration and disruption caused by the pandemic. The study shows almost 2 in 5 (38%) consumers thinking that lives will return to normal by June 2021, rising to 55% for normality by September 2021 and 65% for December 2021. But over a third (35%) believe it will take more than a year for normality to return, with these consumers considerably more likely to cut back spending this year compared with more optimistic consumers.
Today’s report also highlights the changing role of physical stores as shoppers expect a more seamless digital and physical experience on their path to purchase. Digital and consumer experiences that create emotive ties to a brand and how that translates into purchases either in-store or online will be key as retail and leisure business look to pivot their business models post-Covid. Survey data showed almost a quarter (24%) of consumers purchase a product while in a store, rising to almost half (47%) for 18-24-year-olds.
David Scott, Head of Retail and Leisure, NatWest, said: “Our survey shows how the shift to shopping online has fundamentally changed consumer behaviours and expectations as we look ahead to 2021. Retailers and leisure businesses with traditional business models focused on having a physical presence are having a tough time, but there is opportunity to pivot and focus on digital channels that will help them adapt to the growing demand of online.”
“We know that retail and leisure are among the hardest hit sectors during this pandemic, which is why we’ve supported our customers in the sector through the various government loan schemes and other funding options. We also set up an SME Taskforce that will bring together policy makers, business groups and others to find the solutions that can help drive the recovery of the UK economy.”
Richard Lim, Chief Executive, Retail Economics, said: “As the pandemic continues to unfold, many retail and hospitality businesses will remain in survival mode. They are cutting costs to preserve working capital and attempting to strengthen balance sheets to weather the storm as effectively as possible."
“However, as consumer expectations shift, retail and hospitality business must pivot towards a digital-first proposition that align to a new normal. Nimble businesses who are able to react quick can grasp new opportunities in emerging markets, retain loyal customers and thrive as the industry is reformed."
Download the NatWest Retail and Leisure Outlook Report here (PDF 6.9MB)