When the United Kingdom initially locked down in March, the retail sector braced itself for a significant down cycle. Not only were brick and mortar stores forcibly closed, but online shopping briefly stagnated amid international shipping and delivery obstructions. Profits plunged, and reputations were damaged as items ordered before the pandemic failed to arrive. Demand for retail goods remained strong, but avenues of purchase were effectively removed.
Even as lockdowns lift, there still remains the risk of consumer panic. With COVID-19 infection rates still climbing in most of the UK, potential shoppers might be reluctant to leave their homes and take to the busy high streets. Simply ordering items for home delivery might also be viewed as an unnecessary risk. On top of these safety concerns, coronavirus has caused a severe economic downturn and widespread job losses. Consumers might not have as much disposable income as they used to. Entire industries have permanently downsized, and the retail industry may need to follow suit.
Room for growth
All that said, the data so far appears to be promising. DIY stores and garden centres welcomed many eager customers upon their reopening in May, and with all non-essential shops reopened as of 15 June, the rebound is only continuing. As public borrowing hits a record high, UK retail sales have climbed. Sales overall are still down in comparison to 2019, but 2020 might not be the disaster that all retail executives feared.
A potential cause of this abrupt bounce back could be a phenomenon known as revenge spending. First referenced in context of the post-Cultural Revolution China, revenge spending denotes the act of consumers over-buying following a period of demand restrictions. In other words, when consumers are prevented from exercising their demand by purchasing retail products, they tend to purchase even more products than originally desired once they are released from their homes.
Mentally, consumers might view the grandiose purchases as a reward for such a long period of not buying anything. They could also have accumulated savings during the lockdown, which they are eager to spend on luxury or high street items. In addition to these reasons, consumers might be eager to return to normality. By spending excessively, they could view themselves as celebrating the return of society as they once knew it.
Revenge spending is still an evolving phenomenon; however, as the retail sector reopens, it is clear that any sort of excessive spending would benefit it immensely.
For further news on the retail sector, check out the rest of our blog.