Retail Economics conducted a nationally representative consumer panel across six European countries including the U.K., Germany, Italy, Spain, France and Switzerland. The sample comprised more than 3,000 consumers with survey data collected between 19 April and 1 May 2021.
Pre-tax profit margins are forecast to fall to 3.2% by 2025, compared to 3.7% in a ‘no COVID’ scenario where the trajectory for consumer behaviour would have remained unchanged.
However, the lasting impact of COVID-19 will not be felt equally across all retail categories, with some businesses significantly more vulnerable to pressures on profit margins than others. The research has identified apparel, homewares and electricals as those which will experience a permanent step-change in consumer behaviour, brought about by increased online engagement and discovery since the onset of the pandemic.
European consumers now expect to permanently shift approximately 20% of their spend across apparel, homewares and electricals online – an almost fourfold increase from the early stages of the pandemic in May 2020, after prolonged periods of lockdowns further embedded this way of shopping for many consumers.
In contrast, categories such as furniture and jewellery – where online experiences are typically less convenient compared to traditional shopping due to a preference for ‘touch and feel’ browsing – will be most likely return to pre-pandemic conditions, despite some shift in spending.
These changes will be felt most by retailers with a presence in the U.K., with 4 in 10 consumers stating that their shopping habits will change permanently – the highest across Europe.
As retailers attempt to capture online market share, many will undergo a period of transition where profit margins come under intense pressure.
