Consumer stocking up of household, ambient and frozen products in the wake of the coronavirus outbreak is likely to prove a 'zero-sum game' for retailers, with a short term sales boost likely to be echoed by lower demand in the months to come, a leading retail analyst has said.
Clive Black of Shore Capital was commenting following reports of 'panic buying' among UK shoppers; talk of which is 'wholly unhelpful, inappropriate and quite frankly irresponsible', he said in a briefing note.
This behaviour may lead in the near term to significant sales gains in certain categories, however the long-term effects could be negligible.
'Such purchases do not currently seem necessary at a population level to us and, in aggregate, we struggle to see any ongoing benefit to supermarkets and suppliers, as stocking up will, in due course, need to be replaced by de- stocking,' he wrote in a briefing note.
'However, for households where there is self-isolation, such stocking up is understandable and as the virus spreads could become more notable in forthcoming weeks.'
Positive Effects
One area of retail that is likely to receive a boost from the coronavirus is the online channel, which accounts for 7% of the UK grocery market.
Ocado, which recently called on shoppers to place delivery orders early due to 'exceptionally high demand', is likely to enjoy a boost, as is Waitrose, which has seen its online channels grow 17% year-on-year.
In addition, consumer wariness to spend out of home could reverse long-term trends in this area, again to the benefit of supermarkets.
'It is not fanciful for us to expect potentially weaker trading updates from pub companies, coffee shops, cafes and restaurants: maybe even booming Greggs could see a bit of a slowdown in activity,' Black wrote. 'As such, to be clear, more food would be expected to be eaten at home, so boosting for some weeks and months, supermarket demand.'
On the negative side, Black believes that foodservice could be challenged, again linked to a drop in out of home consumption, while labour shortages could impact the retail trade if a 'worst-case scenario' plays out. Non-food sourcing, particularly from China, is also likely to be hit.
BRC Response
On Friday, the British Retail Consortium (BRC) said that its members were 'working hard' to ensure that supermarkets were well-stocked, amid scenes of panic buying in some areas.
"Even where there are challenges, retailers are well-versed in providing effective measures to keep retail sites running smoothly, and they are working with suppliers to increase the supply of goods," commented Helen Dickinson, BRC chief executive.
"Retailers are currently facing a rise in demand for certain products unprecedented outside of the Christmas period. However, this is largely been limited to hygiene and longer shelf-life food products."
It added that it is working alongside the UK government to find ways of mitigating the impact of the coronavirus, particularly on those that are self-isolating.
© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
