Retail and the high street – a COVID-19 accelerated rebirth?
Baguette vending machines replacing bakeries in France; capsule hotels becoming mainstream on a global scale; the rise of rented goods and online shopping. These are just a few of the ways today’s high streets are evolving.
Mothercare, Laura Ashley, Toys R Us – household names were disappearing even before the onset of COVID-19. The pandemic may be at a turning point in the UK, with easements coming through in recent weeks for many vendors including high street retailers, but this will not solve the more fundamental issue of changing trends and consumption habits.
StitchFix, Thread, HURR, HelloFresh and others have begun filling the gap in retail. They have revolutionised the way we think about fashion and food (among other goods), and capitalised on consumers’ busyness, their app-facilitated desire for quick solutions and their increasing environmental conscientiousness. COVID-19 has only accelerated the transition away from physical to online consumerism.
A separate and more subtle issue for traditional high-street retailers is the DB pension scheme. You aren’t going to find too many DB pension schemes associated with the crop of modern retail players; much more likely they are attached to those household names that are struggling to react to changing trends, whilst coping with the competitive disadvantage of supporting a legacy DB liability. COVID-19 has made things even worse, with retailers in many cases battling to avoid insolvency whilst scheme funding levels fall as a consequence of market volatility. Where required, the PPF can pick up the pieces to an extent, but members often do not get the pensions they were originally promised.
However, it’s not all bad news; the new kids on the block are not all at war with traditional retail. Some are helping to revitalise companies – as in the case of online wine shop Tannico, in which Campari has recently acquired a significant stake, to accelerate Campari’s transition to online retail. Traditional retail may be in decline, but retail as a whole is showing promising signs, with online retailers recognising the value of traditional brands (and vice versa) and keen to work hand-in-hand with them. COVID-19 has created a further stumbling block to an already difficult situation, but where employers can learn from these lessons and adapt quickly, there is still long-term value to be created and shared with their DB pension schemes.
Flo Gracey, Analyst
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