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May 2021 update

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Reopening our high streets

With the long-awaited reopening of non-essential retail, it’s been a pivotal moment as we progress through the Government’s roadmap. In our continuing series of features, Health Food Business discovers current trading patterns and the expectations as restrictions continue to lift.

April 12 will go down as one of the pivotal moments when we look back on life resuming to some kind of normality. For that was the day that non-essential shops were allowed to reopen after months of forced closures, effectively allowing high streets to return to an element of normal trading. Whether footfall returns to prepandemic levels swiftly remains to be seen, given consumer confidence may take some time to re-establish, but it certainly appears that the appetite is there.
According to the British Retail Consortium (BRC), on a total basis, sales increased by 8.3 per cent in March compared to the same period in 2019 (as accurate comparison against March 2020 could not be made), against a decline of 0.5 per cent in March 2019. This is above the three month average growth of 2.7 per cent.

However, BRC Chief Executive, Helen Dickinson OBE, also warned: “Despite some product ranges trading well, the next six months will be make or break for many retailers. Over the past three lockdowns, non-food retail stores have lost £30bn, so many retailers will be relying on growing consumer confidence, and a return to town and city centres to fuel their recovery.”

Furthermore, according to the April 12 will go down as one of the pivotal moments when we look back on life resuming to some kind of normality. For that was the day that non-essential shops were allowed to reopen after months of forced closures, effectively allowing high streets to return to an element of normal trading. Whether footfall returns to prepandemic levels swiftly remains to be seen, given consumer confidence may take some time to re-establish, but it
certainly appears that the appetite is there. According to the British Retail Consortium (BRC), on a total basis, sales increased by 8.3 per cent in March compared to Federation of Small Business (FSB) in its quarterly Small Business Index (SBI), the majority of firms forecast increase in revenues and aspire to grow. Almost two thirds (58 per cent) of small businesses expect their performance to improve this  quarter, and fewer than one in three (31 per cent) expect theirs will worsen. With trading restrictions easing across England and Wales on April 12, the business group reports that its UK SBI confidence measure has risen to +27.3 in Q1 of this year, up from -49.3 last quarter. The index is at its highest level since Q3 2014, when it hit +41.0, and is in positive territory for the first time since Q2 2018.

FSB National Chairman, Mike Cherry, commented: “With emergency loan repayments now starting to bite, the Government should carefully consider routes to realising economic value from the facilities it has underwritten: an approach to repayment based on the student loan model and greater adoption of employee ownership trusts could both mark constructive ways forward.

“Lockdowns have caused our £23bn late payment crisis to deepen. As confidence returns, now is the time to bring forward reforms that will help audit committees gain full visibility of payment practices.

“As the economy shifts, support measures need to evolve – particularly where support for start-ups is concerned. The Help to Grow initiative should be urgently reformed in order to both widen its support remit and make it open to all small business owners as they start out, not just those that already have staff.”

And in a further boost, a report from Cornerstone Tax shows that nearly 28m Brits want to support their independent, local businesses, and over 13 per cent have started or want to start their own.

David Hannah, Principal Consultant at Cornerstone Tax, commented: “Stores we know and love have gone under and our high streets are empty of shoppers, but now the lockdown restrictions are easing and a vaccine rollout of historic proportions is underway. All the research shows that there will be a myriad of resilient founders and entrepreneurs to support, new businesses to look out for, and a British public ready to back them all – particularly those local independents so important for our communities and our economy. This truly shows we are a nation of shopkeepers.”

Health food focus
But what does this all mean for our sector, which has remained trading, in the main, throughout the pandemic? Are we expecting to continue seeing buoyant trade, and what trends lay ahead?

Joanne Hill is the owner of Amaranth, which has stores in the village of Bramhall and Manchester city centre, the latter suffering to a greater degree given Manchester has been effectively shut down for months.

Commenting on the trends we have been seeing, Joanne said: “Since the January lockdown, footfall into the shop has been significantly reduced as expected and sales revenue is down. We have, however, seen a large increase in online sales. As we have moved towards the lifting of restrictions, this has started to change – in-store sales and footfall is increasing, whilst online sales are reducing.

“Spending habits are still not yet returning to normal levels though, I think there are a number of reasons for this. Firstly, we are based in a village with a large number of restaurants and cafes. Without these, footfall is significantly reduced. Secondly, demand for skincare and natural beauty products has fallen, people seem to coming out for their essentials but have less of an interest in their beauty routine.”

Marie Longman, owner of Peak Health Food, in the town of Rugeley, continued: “We’ve noticed that trends have started to resume in the manner that they were before the first lockdown. Customers who previously relied on home delivery are now either visiting our store or choosing click and collect. Our elderly customers are gladly returning, some of these customers we’ve not seen for a year. Average spend per customer is still very high, but customer numbers are increasing too. I think that customers are trying to get all their goods in one visit, rather than relying on being able to randomly pop in.”

Al Overton, Buying Director at Planet Organic, went on: “We are perhaps seeing the balance between online and in-store shopping shifting back a little, but it is too early to really identify what the impact of lockdown easing will be.

“Baking sales have eased since early lockdown as people have settled into whatever their new working routine is, and there is no longer a worldwide shortage of baking yeast. We are still seeing increased sales of the at-home rather than the on-the-go but have noticed a particular increase in organic essentials, rather than our specialty categories. Shoppers are buying local for fresh foods, so our store sales of organic fruit and veg, meat, fish and fresh foods are performing better than ambient groceries.”

And have product trends shifted from the early days of lockdown?

“Products in demand have certainly changed. Customers have learnt that there is no need to stockpile particular goods. This last lockdown has shown a general level of apathy with regards to food items. However, with various supplement out-of-stocks, we are finding that customers are buying larger quantities for fear of them running out,” Marie reported.

Joanne added: “In the early days of lockdown, we saw a big increase in demand for immune support and vitamin D, as would be expected. This has definitely reduced now, and we are seeing more demand for products to support other conditions – joints, digestion and skin, for example. We are also seeing an increase in demand for products to support mood and anxiety. We seem to be seeing more women reporting hormonal mood related conditions, which is likely to be a combination of the stress of lockdown affecting hormone systems but also women are more aware of these symptoms due to being at home more.”

From a product perspective, we have seen innovation, something that has always been the cornerstone of independents, but is this something we can expect to be dialled up as greater numbers of shoppers emerge? “Since the new year, we have brought in new snack related goods and new body care lines. Even though sales may have been lower, we can’t afford to stagnate. We need to generate interest and curiosity with our customers in order to bring them to the store,” Marie commented.

Al reported that introducing new products has been difficult, despite Planet Organic’s desire to do so. He reported: “NPD has been much harder to find as brands are slower to set up or have been holding NPD for more promising sales later in the year. Our business is driven by new products, and we are always keen to add more innovative, specialty health products to our arrange to inspire our customers.”

And Joanne added: “We have continued to list some new products. We will continue to develop our zero waste lines and refills of higher end brands, such as Fushi, as we see a demand for this. We will also be looking at our wellness ranges, such as essential oils, home fragrances and bath products. People will still be spending greater time indoors for a while to come as their habits and working patterns have changed but I think personal care will increasingly become a priority for people.”

Habits to stay

While footfall is expected to slowly start picking up, could it be the case that certain trends – online shopping being one example – are here to stay in the longer term? And what does this mean for you as independents?

“If working patterns have changed for good, then that has an impact on overall behaviours and social trends, but I think many of us are desperate to get out and about and back to the old normal. Post lockdown, it may swing the other way as we overdo the things we have not been able to do for a year, and then depending on what happens with the autumn/winter cold season, it may be a while before we see what the long-term changes really are,” Al commented.

And Joanne added: “I think self-care and wellness in general will remain a high priority for many people. People have reflected on their lives pre-pandemic and many don’t want to get back into such busy lives so I think they will continue to
take time out to prioritise themselves. We are seeing this in enquiries for treatment bookings and hopefully this is something that will continue. In terms of products, vitamin D is certainly here to stay, this seems to be the one thing that everyone recognises as important.”

Marie continued: “We now have a few customers who will probably continue to need home delivery. Some of these are customers who live a fair distance from our shop. We are happy to continue with this, but the downside is that they are not coming into store and seeing new stock nor getting the opportunity to chat with us, so we’re not able to actively promote new sales.”

And what changes have been implemented at a retail level that have been positive?

Al advised: “We have invested in e-commerce and our digital development, which was overdue, and will bring ongoing benefits. As community-based retailers, I also think we have a closer connection with our communities, having been through this together and supported each other.”

Joanne added: “The last year gave us a chance to prioritise and focus on our website and social media. We built a new website, which performs a lot better and is much more user friendly than our previous site. Without the pandemic, it is unlikely that we would have got round to working on this. We have also grown our audience on social media. We now understand how to increase our engagement and drive sales to the website so we will continue to use these skills going forward. I have been working hard on the business to define our aims and direction and followed this with processed
and team training. We are now much clearer and organised to take this forward into busier days ahead.”

Challenges ahead

After the year that has been experienced, both professionally and personally, no one could expect trade to resume back to prepandemic levels, in terms of patterns and footfall, instantly. So, with the high street effectively open again, what challenges are expected as we move forward?

For us, retail has been a challenge since the start of the pandemic,” Joanne commented. “Our store in a local village stayed open but sales were still reduced on the previous year, which is largely due to low footfall as the other businesses around us are closed. Our store in central Manchester closed during lockdown as it only has a small food range and specialises in supplements, beauty and treatments. Footfall in the city centre has been as low as 20 per cent of the same period last year.

“Non-essential retail is now reopening but it will remain a challenge in the city centre as businesses are not returning to the office in the same way they were. A further challenge to us is that a large percentage of our sales are from beauty products, the demand for these has decreased and I believe people are shopping online more for these products. This was a necessity for many during lockdown but now they are used to the sites they have ordered from and are tempted by online marketing and discounts. Whilst we have an online store, we often cannot compete with big online players in pricing and discounts. We will need to work hard to get these customers back for these products and so will be launching in-store events as soon as we can.”

She added: “I think initially things will still be slow, particularly in the city centre. We may see a boost in the first few weeks as people take their first shopping trip, but I think things will only start to really increase after June when we hopefully see more restrictions lifted, a confidence to return to the office and indoor hospitality opens.”

Better but cautious is how Al is seeing it. “Restaurants reopening will affect all food retailers, as will just being able to go to shops other than food stores. It will also be interesting to see what the people movements over the summer holidays are like,” he commented. “The West End is still very quiet, so we have one store closed. It is still difficult to offer a shopping experience in terms of service, sampling and theatre when everyone is in masks and shoppers are quite focused on getting
in and out.”

Marie added: “We anticipate a distinct upturn and very much look forward to our neighbouring shops returning. We intend
to kickstart customer interest by offering a month of gift-with-purchase and special offers. Hopefully, the lockdowns will
serve to remind customers what a closed town centre will be like once the internet overwhelms.”

In terms of specific issues, Marie pinpointed supply problems, commenting: “I’m finding the main challenges are coming from our suppliers. Suppliers wanting to be retailers, and also suppliers underselling their goods in discount stores. The latter is causing so much disruption, we’ve experienced customers demanding refunds when they find goods sold in these bargain shops. We’re having to rethink our stock and delist quickly. Other challenges are out-of-stocks, which seem at aparticularly high level currently.”

The supplier viewpoint

Suppliers have been faced with unprecedent demand, changing product trends, not to mention factoring in Brexit, as well as facing new ways to manage retail customers. So, how are they faring and what difficulties are they facing as we move through the Government’s roadmap?

Maria Dawson, Commercial Director at Clearspring, commented: “Shoppers are not stockpiling as they were during
the first lockdown. However, sales are still up from the same period in 2019. We expect sales to normalise to pre-Covid
levels once all restrictions are lifted. The trend towards organic is one we expect to continue. The growing shift from conventional to organic and plant-based was accelerated because of the pandemic and we believe the shopper
base will continue to grow, as health and sustainability continue to increase in importance.

“Staple products are still doing very well and continue to be in demand through the current lockdown. However, the increase in scratch cooking has inspired more interest in cooking international flavours at home and items such as our Organic Silken Tofu, Sushi range and seasonings have all delivered strong sales growth.”

Julian Lucas, Sales and Marketing Manager at vegan brand, Plamil, continued: “So far, the lockdown trends are still with us. This has resulted in a huge increase in our online sales. We have not yet noticed any change due to the lifting of restrictions. There seems to be a strong move in the market towards vegan products. As lockdowns have continued,
ethically sourced and UK made products are becoming more important to consumers.

“Healthy food options are certainly high on the list of requirements now. I imagine that there will be a limited shift away from online shopping when restrictions are relaxed and shops open but I would suggest that independent retailers need to have online sales and the ability to deliver to their customers.”

Forecasting trading patterns over the last year has been incredibly difficult for brand owners, give  how changeable trade and patterns has been. In terms of trends expected, there are some thoughts on where we might head to.

“There are a lot of trends we believe will continue post-pandemic. This includes the trend towards organic, healthier eating
and scratch-cooking. Whatever post-Covid normal looks like, some of these trends are here to stay because the pandemic has helped to bring health issues around diet, health and a strong immunity, alongside food integrity and provenance to the fore,” Maria reported.

“Amongst our biggest challenges has been responding effectively and sensibly to the increased demand. We have had to carefully manage ordering enough stock to fulfil orders, as well as ensure that we responsibly allocate stock so that all our customers are receiving stock to supply their local communities. The long-term relationships we have with our suppliers has really paid off and we, working in partnership with producers and the supply chain, have improved our working processes to last beyond the pandemic.”

She added: “Our key priority will be to support retailers with our new products and continue our engagement with a wider consumer audience on the benefits of organic and plant-based, to help drive traffic and footfall into stores.”

Lucas believes we will see more of a focus on local shopping as we move forward to a new trading pattern.

“I believe more consumers will shun the major retailers and concentrate on local shops stocking healthy options,” he commented, adding: “Online shopping is here to stay so if independents can embrace this as well, the future is looking good. More consumers will continue to look for vegan and products with reduced or no added sugar. Health will be paramount.”

When discussing the challenges facing our industry, post-lockdown, Lucas referred to the issues around Brexit.

“Our Government has heaped a great deal of damage on the food industry with its ill-thought-out hard Brexit. Business is suffering as the importation of ingredients is disrupting our manufacturing. Export sales are also taking a hit as the massive increase in red tape as a result of the UK no longer being in the single market,” he explained.

“Many of our larger European customers have remained, in spite of the extra work and costs but the smaller ones are struggling to buy our products. This is coupled with the extra restrictions we have imposed on site to shield our staff from Covid. It is likely that automated manufacturing aids that we have introduced will continue to keep the staff’s social distancing.”

A word on e-commerce

All the data confirms that online has seen a huge spike during the pandemic, understandably so as consumers couldn’t physically shop for the items they wanted in non-essential stores. We have seen many health food retailers react quickly
to e-commerce, with a number reporting strong sales.

LoyalFree is set up to support independent retailers in their e-commerce offering, and Sophie Carrick, Marketing and Business Development Manager, commented: “During the pandemic, we saw a huge rise in small independent businesses looking for an easy, cost-effective way to continue to operate and serve their customers, despite the restrictions of the lockdown. There was a clear increase of consumers wanting to support small, local independent businesses and, as such, we saw an increase in both the sale and purchase of gift cards. Gift cards are an easy product for businesses to distribute
cost effectively, allowing them to obtain vital cash flow immediately during an incredibly difficult climate.”

But why was a service such as LoyalFree such a popular proposition?

“Creating your own e-commerce websites can range from £3,000 to £9,000, with additional hosting and management costs on top. The turnaround time for an e-commerce site is often between two to 12 months. These factors can be a real barrier to independent businesses getting set up online. Although other ‘shared’ e-commerce sites provide a faster turnaround time, they are often associated with hefty fees,” advised Sophie.

“The LoyalFree Marketplace provides independent businesses with an opportunity to create their own e-commerce site for a fraction of the cost or for free if they operate within one of our 30 BID (Business Improvement District) partnership areas. Not only is the LoyalFree Marketplace a cost-effective solution, once registered a business can be up and running in a matter of minutes.”

Trends wise when it comes to e-commerce, Sophie continued: “We have seen an increase in retailers exploring more servicing options in order to fulfil their sales. This has resulted in a huge rise in the number of shops offering click and collect services, allowing businesses to minimise delivery cost and ensure their profit margins remain unaffected.

“With more consumers turning to e-commerce for time saving and price competitive options, I think this trend is
here to stay. An online store is a digital shop window and should be seen as complementary to your bricks and mortar
store. E-commerce cannot replace an in-person shopping experience, but it can help with cross-selling, up-selling, brand
awareness, communication and brand visibility.”

And how does Sophie envisage online retail evolving as we progress out of the pandemic?

“As we move out of the pandemic, I’m confident we will see an increase in footfall back into the city centres. People are eager to get out and experience in-person shopping along with other multi-faceted experiences the high street has to offer,
such as dining, drinks and socialising,” she commented.

“Customers and retailers have all become more aware of the possibilities offered by the integration of digital technology
and online platforms to augment their traditional shopping experience. I think we will see an increase in tech-enabled
solutions for the high street such as high street apps, augmented reality, e-commerce, social selling etc.”

To read the full article, visit https://www.healthfoodbusiness.co.uk/imag/hfbmay21/index.html?page=16 

*This article was originally published in the May 2021 issue of Health Food Business magazine. Statistics were correct at the time of publication.

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