Masks and marshalls: Christmas shopping will be different this year

Sue Mitchell

Sep 18, 2020

AFR

The launch of Japanese retailer Uniqlo’s 24th Australian store this week provided a preview of Christmas shopping COVID-19-style.

The socially distanced customer queue spilled from the foyer of Westfield Bondi Junction into Oxford Street, and Uniqlo staff wearing the traditional red-and-white Happi coats and not-so-traditional black masks made sure only 100 shoppers entered the 1323sq m store at a time.

Inside, there were more socially distanced queues for the change rooms and registers as cashed-up eastern suburbs shoppers snapped up T-shirts, shirts, pants and underwear.

It was a different picture 880 kilometres away in Melbourne, where Uniqlo’s eight stores have been closed for six weeks under stage four restrictions and are likely to remain shuttered until at least October 26.

Retailing is slowly but surely returning to something like normal in NSW, Queensland, South Australian, Western Australia, Tasmania and the territories, but the road out for retailers in Victoria remains uncertain.

Most discretionary retailers hope to reopen on October 26, but for stage three restrictions to take effect the statewide average for new cases must be less than five for the preceding fortnight and there must be fewer than five community transmission cases in that period.

If case numbers fail to fall to the required level, Melbourne retailers may not open until November 23, just four days before Black Friday and four weeks before Christmas.

It’s a prospect that alarms Australian Retailers Association and former David Jones chief Paul Zahra, who warned last week that as many as half of all small businesses in Victoria could be wiped out by the extended closures.

“Dealing with that level of volume is challenging regardless – all of a sudden in Victoria you’ve got this compressed shopping time,” Zahra told AFR Weekend.

“We’re now considering how to manage that crowd control and social distancing,” he said.

The association has proposed a progressive retail reopening and measures such as mandatory masks, limits on shoppers per household, marshalls to manage queues and social distancing, and ‘bubbles’ for distribution centre staff and online fulfilment staff with no crossover periods to reduce the risk of transmission.

Woolworths chief Brad Banducci says the retailer is testing automated customer counting technology at store entrances to keep track of customer numbers. When the number of customers hits a store’s limit, staff will be notified in an app and implement queuing.

Australian Retailers Association CEO Paul Zahra has proposed a progressive reopening of retail in Melbourne with mandatory masks, limits per household and marshalls. Alex Ellinghausen

“Retailers have pivoted online but they’ve been asked to do it with one-third less staff so there’s a massive bottleneck of product waiting to get out of warehouses – that’s causing a lot of pressure,” Zahra said.

Online sales doubled for many retailers in the June half, lifting online penetration to levels that otherwise would have taken years to achieve without the pandemic.

For example, manchester retailer Adairs’ online sales have soared to 26.5 per cent of sales from 17.1 per cent, Baby Bunting’s to 14.5 per cent from 11.8 per cent and footwear retailer Accent Group’s to 17 per cent from 15 per cent.

Some retailers, including JB Hi-Fi, Accent Group and David Jones, are using locked-down Melbourne stores as dark stores to pick and deliver online orders, keeping staff who would otherwise have been stood down gainfully employed.

“We’re not entirely asleep here, we are doing a lot,” said Roy Bagattini, the chief executive of South African retailer Woolworths, which owns David Jones and the Country Road Group.

“Our online business continues to perform well and we’re leveraging the store base to support that – the dark store concept has been significantly helpful in that process,” Bagattini said after unveiling David Jones’ $33 million loss in 2020. David Jones’ online sales doubled in the June-half, reaching 18.4 per cent of sales.

“Beyond that, we continue to do a lot of the work that you typically aren’t able to do as a retailer when you’re up and running – we’re putting a lot of foundational things in place, spending time training people, and setting ourselves up so when the opportunity arrives we can come out quickly,” he said.

“We’re hoping that infection rates get to the level that the state government feels are acceptable enough to lift the restrictions sooner rather than later,” he said. “But we’re in it with everyone else. it is painful but we’re part of it.

“We’re planning for October 26, that’s still where we’re at, but we appreciate that anything can happen and that could be extended – that does create challenges for the Christmas season.”

However, Bagattini is encouraged that outside Victoria David Jones and Country Road Group stores are bouncing back.

They’re in the mood for shopping. They’re not wandering around, they’re not browsing. They’re buying what they need and leaving.

— Derek Muirhead, T2 managing director

At David Jones’ flagship Elizabeth Street store, which completed a lengthy $440 million refurbishment in July, foot traffic is still down but customers are spending more.

“Although footfall is down our transaction values have increased quite dramatically – up 80 per cent plus,” he said. “We’re very encouraged by what we’re seeing coming out of restrictions.”

It’s a similar story at upmarket tea retailer T2, which closed 65 Australian stores during the national lockdown in March and April and was forced to shutter 18 stores in Melbourne under the stage 4 restrictions.

“What’s fascinating for us is that stores that have opened with much lower traffic than pre-pandemic, the customers are singular-focused,” said T2 managing director Derek Muirhead.

“They’re in the mood for shopping, they’re not wandering around, they’re not browsing, they’re buying what they need and leave,” he said.

“So even though we have lower traffic, the conversion levels we’re achieving are higher than we’ve ever experienced before and average transaction values are at levels we’ve never seen before.”

According to Kepler Analytics, while foot traffic outside stores was down about 30 per cent (excluding Victoria) year on year in late August and early September, sales conversion was 12 per cent to 15 per cent higher than that in the previous two years and average transaction value was up 11 per cent to 15 per cent, underpinning double digit sales growth.

Spending is being propped up by JobKeeper and the JobSeeker supplement, the early withdrawal of superannuation and the redirection of spending on international travel.

In reports this week, brokers Macquarie and Jefferies estimated that Australian households would save between $61 billion and $65 billion this year on overseas travel, a large part of which would be redirected to retail spending.

Jefferies analyst Michael Simotas said savings on international travel would be worth almost twice the value of early superannuation withdrawals to date.

“While domestic travel is likely to recover reasonably quickly, international is likely to take years to recover,” he said.

Six months after panic buying cleared supermarket shelves, retailers across the board are running short of stock after underestimating demand.

“Stimulus will roll off and the early superannuation payments will end, but this reduction in travel spend is likely to be redeployed on other discretionary consumption.”

Whilst most Australian retailers are closing underperforming stores and reviewing plans for new stores, Uniqlo will open three stores this year on the back of the surge in online shopping.

It opened a store at Karrinyup in July, the Bondi store on Thursday, and a new store in Liverpool in Sydney is slated for November, taking the network to 25 and lifting sales to more than $300 million in the space of six years.

“As a newer player in the Australian retail market, having stores in key locations is one of the ways we introduce the brand to new customers,” a Uniqlo spokesman said.

“Throughout the COVID-19 pandemic, Uniqlo has been very encouraged by the strong support from our Australian customers who have continued to engage with us both in our physical stores and online store,” the spokesman said.

“It is through our customers’ ongoing support that we are in the position to confidently expand our physical footprint during these challenging times.”