"Impact of COVID-19 on the retail sales-A case study of Burberry"
Abstract
Introduction: This chapter has included all the necessary information regarding the topic of the research including rationale and significance. It has focused on introducing the topic of the “impact of a covid-19 pandemic on the retail sector in the UK”. One of the most renowned brands, Burberry has also been affected by the pandemic and through its analysis, the impact on the retail sector has been showcased. The structure of the dissertation has been provided in this chapter.
Chapter 1: Introduction
1.1 Introduction
This chapter introduces the topic of the research which is to analyse and critically discuss the “effect of Covid-19 on the retail sector” in the context of a fashion brand named Burberry, a UK based luxury fashion brand (burberry.com, 2022). The retail sector is one of the largest sectors that makes a generous contribution to the UK GDP rate and economy. In 2020, the Covid-19 pandemic hit the UK retail sector due to which the UK economy also faced a downfall. This chapter would explicitly discuss the research rationale, aims, objectives, research questions, significance, structure and provide a summary. This will help to properly conduct the research and develop a brief understanding of the topic.
1.2 Background of the research
In 2020, every sector in the UK was faced with the challenges imposed by the Covid-19 pandemic. In the UK, the retail sector comprises 5% of the GDP and according to the reports, total retail sales volume was 19% lower compared to February (ons.gov.uk, 2021). The retail industry faced the challenge as it requires customers to be physically available at the stores to make a purchase and contribute to the growth of company revenue. The first lockdown in England had significantly affected the people and the businesses which led to considerably less card spending. Due to the offline stores being closed, companies had to focus on shifting their business to the online platform. Online sales rose by 34% in the retail sector which helped in gaining stability (ons.gov.uk, 2021).
The research has focused on how pandemic has affected the market of Burberry, a luxury fashion brand in the UK. As stated by BIONDI (2020), Burberry faced immense challenges when the “operating profits fell by 57% to £189 million and the sales declined by £2.5 billion”. The brand stores remain closed in many countries due to the lockdown and pandemic. To systematically approach the pandemic effect, the brand has completely focused on luxury doors and reduced the wholesale network in the US. Due to the pandemic, the retail stores faced the disruption of the supply chain which was caused due to the reduction of drivers and increased monitoring.
Figure 1.2: Impact of lockdown on Burberry stores
(Source: BIONDI, 2020)
1.3 Research Rationale
The issue in this research is “the impact of the Covid-19 pandemic on the retail sector in the UK”. Retail sector is one of the largest sectors in the UK that contributes positively to the UK economy. However, ever since Covid-19 affected people, the UK government had to exercise control over the movement of the general mass and impose lockdown which has increased e-commerce (Sayyida et al., 2021). The pandemic resulted in the complete lockdown of stores and offices which led to the downfall of businesses. Burberry is a renowned fashion and luxury brand that operates business in the UK which has faced considerable challenges due to the lockdown. It has become a major issue as the UK economy is facing a problematic situation that requires recovery to a large extent.
Figure 1.2: Fall of retail (fashion and shopping) sector
(Source: ons.gov.uk, 2021)
Retail sales dropped by 1.9% in the year 2020 which was the largest annual fall. The pandemic has had a terrible effect on consumer retail stores by 22.5% in 2020 (ons.gov.uk, 2021). It is required to be understood that the economy of the UK was hampered due to the imposition of pandemic restrictions to control the spread of the virus. Burberry has reported the fall of sales since 2020 due to all the retail physical stores being closed down. As per Jolly (2021), the shares of the company fell by 5% which made it the “biggest fallers on the FTSE 100” in 2021. The pandemic restrictions in the Asia-Pacific region made it difficult for the company to make targeted sales as per their assessment. Initially, it has been recorded that the volume of “retail sales grew by 0.3%” in December as the restrictions were eased down.
1.4 Research aims and objectives
The research aims to evaluate the "impact of COVID-19 on retail sales-A case study of Burberry".
Research objectives
To evaluate impact on the economy of the UK due to Covid-19 pandemic
To analyse the impact of Covid-19 on the retail sector
To identify and evaluate the impact of a pandemic on Burberry
To recommend strategies to mitigate the challenges faced by Burberry
1.5 Research questions
How has the Covid-19 pandemic affected the UK economy?
What is the effect of Covid-19 on the retail sector?
How did Covid-19 affect the sales of Burberry?
What strategies can be recommended to mitigate the challenges faced by Burberry?
1.6 Research Significance
The research is significant to the current scenario developed in the UK economically and the position of the retail market. The research emphasises the retail market, its revenue structure, its losses and significant reduction to the contribution of UK GDP. The research should benefit future researchers, students and retail companies who wish to analyze the retail market during tough situations such as the Covid-19 pandemic. According to Forsythe et al. (2020), the impact on non-essential retail items has been severe compared to the essential products. Burberry is a luxury brand that is not accounted for as an essential retail item and hence, through the analysis of its loss and reduction in sales, the research has been able to display the loss in the retail industry.
1.7 Structure of research
There are five chapters in the research namely, “introduction, literature review, methodology, results and discussion and conclusion”. The introduction chapter has properly introduced and discussed the main points of the research. The literature review has critically provided views of eminent authors based on the topic and the methodology provides the necessary details on the collection and analysis of data. The results and discussion section has included all the research findings in the context of the research topic along with an extensive analysis of the key factors. Lastly, the conclusion chapter has focused on providing an overall understanding of the entire work.
Figure 1.3: Structure of Dissertation
(Source: Self-developed)
1.8 Summary
This chapter has provided the research rationale and significance that the Covid-19 pandemic has negatively affected the retail industry and the sales of Burberry has faced several challenges. The retail sector has been deeply impacted by the pandemic lockdowns in the UK which is required to be analysed properly. The company has accounted for a loss of £2.5 billion in the sales department. It has been understood that retail contributed to 5% of the UK GDP rate which was essential for maintaining stability in the economy. It has been found that reduced trade and commerce is due to the disruption in the supply chain has also affected the company.
Reference List
BIONDI, A. (2020) Burberry profit falls by more than half over Covid-19. Available at: https://www.voguebusiness.com/companies/burberry-profit-falls-by-more-than-half-on-covid-19 [Accessed 10th March 2022]
burberry.com (2022) About Us. Home Page. Available at: https://www.voguebusiness.com/companies/burberry-profit-falls-by-more-than-half-on-covid-19 [Accessed 10th March 2022]
Forsythe, E. Kahn, L.B. Lange, F. and Wiczer, D. (2020) ‘Labor demand in the time of COVID-19: Evidence from vacancy postings and UI claims’, Journal of public economics, 189, p.104238.
Jolly, J. (2021) Burberry reports slow sales growth as Covid impact persists. Available at: https://www.theguardian.com/business/2021/nov/11/burberry-reports-slow-sales-growth-as-covid-impact-persists [Accessed 10th March 2022]
ons.gov.uk (2021) Impact of the coronavirus (COVID-19) pandemic on retail sales in 2020. Available at: https://www.theguardian.com/business/2021/nov/11/burberry-reports-slow-sales-growth-as-covid-impact-persists [Accessed 10th March 2022]
Sayyida, S. Hartini, S. Gunawan, S. and Husin, S.N. (2021) ‘The impact of the COVID-19 pandemic on retail consumer behavior’, Aptisi Transactions on Management (ATM), 5(1), pp.79-88.
