Socio-Economic Factors on the UK Retail Industry in 2020

Introduction

The purpose of this report is to categorically look at the retail industry in the context of the year 2020 and to reflect on the economic effect that it has had on the retail workers in the UK. While the objective of the report is to holistically look at the effect that the various socio-economic situations have had on the retail industry, it will also categorically reflect on the plight of the retail workers and their concerns for well-being and safety. This report will concentrate on examining issues like the phenomenon of Brexit and the pandemic in order to understand how the retail industry in the UK has been affected. This will be done in the context of Debenham’s retail stores in the UK, which had several stores across the country. A mixed method is used to collect data and make inferences about this topic and see if the hypothesis that was made tallies up with what the data has produced.

The research anticipates that there has been a significant change in the profit margins of the company and the additional burden of the economic strain brought about in 2020 was responsible for the closing down of the stores and caused significant job losses among the employees of the retail company.

The purpose of inquiring into this particular question for Debenham’s is because the company recently closed it stores, sending shock waves across the business world in the UK. The once very successful chain of stores decided to close its stores across the UK and put thousands of workers out of a job. It has been estimated that over 12,000 workers lost their jobs (The Economic Times, January 25 2021). In this scenario, it is important to examine why this particular phenomenon took place and what are the external and internal factors which contributed to this.

Methodology

The research used a mixture of qualitative and quantitative work in order to determine whether or not the hypothesis was getting confirmed. The research tool which was used to understand the perspectives of the retail workers of Debenham’s was a questionnaire, which included both open and close ended questions.

2.1 Considering the Case Study

The Case study was required to be studied from an objective perspective, so the researchers aimed to disengage from their own personal biases. Considering the specific case, a preliminary set of questions was developed and further improved when the literature review revealed further things. Analytical Generalisation was used to compare the findings with related research in order to make a qualitative analysis (Gray, 2017). The approach was used in order to understand the research results from a completely positivist perspective (Bryman and Bell, 2015).

2.2 Research Tools

The research tools which were used in this particular research was a semi-structured questionnaire, which was consisting of both open and close-ended questions. Because the data analysis was thematic in nature, the questions are arranged in a thematic fashion as well, for the ease of isolating the themes of the results (Robson and McCarten, 2016). Because of the current situation, the surveys were conducted using Survey Monkey for remote surveying. Facebook was the arena on which samples were approached. For the ease of reaching participants, snowball sampling methods were used whereby participants were encouraged to contact other employees who have been employees at Debenham’s.

2.3 Sample

The data sample consisted of 12 employees who were the previous workers of Debenhams. The researchers contacted 30 individuals who, on public record, declared that they were the workers of Debenham’s before the organization closed its shutters. The sample size consisted of 9 English-origin individual, 2 Asian individuals and 1 were of other ethnicities. The sample size was almost equally divided between males and females and ranged between the ages of 18-67. For ease of classification, the sample size was divided on the basis of their designation under management, which they held before they were let go when the retail company went down.

2.4 Data Analysis

The data was collected and compiled using Microsoft Excel and a matrix was made according to which the data was analysed thematically. Upon causally examining the matrix, themes were isolated and on the basis of that, the research separated themes which the survey findings revealed.

3. Presentation of Findings

According to the data which was produced, there are several themes which were identified in the research. This section will examine the themes which emerged from the research findings and subsequently compare them with the recent developments that are taking place in the retail industry as a whole.

3.1 The Macro Implication of the Retail Industry in the UK

This aspect of the research concentrated solely on the study of existing literature in order to understand how the retail industry was affected in 2020. Two of the main themes that the paper traced from studying the literature was the effect of Brexit on the economy of the British economy and the effect of COVID on the socio-cultural mobility and purchasing decisions of consumers.

3.1.1 The Effect of Brexit

The UK has had a significant trading relationship with the EU, in 2016, when the referendum for Brexit was taking place, the UK exported around 320 billion dollars worth of exports to the EU (Ward, 2017). It was to be expected, then, that the exit of the UK from the EU would be a significant economic blow and the loss of an important trading partner if strict regulations are applied with regards to its trading with the EU.

The final call for Brexit has taken place recently, but the anticipation of the move has already set in motion several things which have made an impact on the industries of the UK. An important aspect is uncertainty and literature revealed that businesses which are uncertain in their approach to where they’ll stand post the decision, those firms have seen a lower growth rate. Ahmad et al (2020) also speak of the uncertainties because of Brexit and discover that the impact varies from industry to industry. The retail industry is highly dependent on cross- border raw materials and relies on relaxed trade and import policies to supplement its profits. In the absence of that, it is likely that investors would be uncertain about the future of the firm and choose to take away their investment.

3.1.1 The Effect of COVID 19 on the Retail Industry

Because of the transmission of the highly contagious SARS-CoV-2, it has been estimated that around 4.5 billion people have been put on lockdown across the world (Docherty et al, 2020). This has caused an overall reduction in the expenditure of UK households, especially in the retail industry, and this has been a major cause for concern (Hoke et al,2020).

Hoke et al (2020) discover that since the tentative beginning of the pandemic, consumer spending in the UK has dropped around 40-50% by British households. This is mainly due to the fact that there has been a decline in income by the average UK consumer by 30%. In their study, they discover that in the month of March, in 2020, there was a significant decline in the buying of items like clothing. Lea (2020) reported that while sales recovered in the second half of 2020, that was only for stores which sold retail online.

3.2 Micro Implication

The data which was gathered by the report from the employees indicated that the level of satisfaction that the employees enjoyed before Brexit and COVID became a factor was not very high. Frequently, workers responded to the researchers that the pay was subpar and not proportionate to the kind of work they were doing. Workers in countries like France, Germany and Netherlands have furlough and short-term benefits programmes for employees in COVID times, which UK lacks (Fujita et al, 2020). There are little benefits for employed or part time workers, like the JRS scheme, but even fewer for unemployed workers (Anand, 2020).

Another phenomenon which was reported by the workers was the gradual termination of employees which was taking place. The most commonly cited issue that the workers were having was the uncertainty that they were facing with their jobs. According to all the workers, pay cut was something that all of them faced uniformly and across departments. While the workers did not have any information about what kind of pay cuts were being experienced by the managerial staff, they estimate that the relative utility of their salary as opposed to the management’s salary was more, as they relied on their salary for meeting basic needs such as food and rent.

Another important issue that the workers were facing was the issue of stretching work hours. This was a consequence of workers being let go of, which was leading to increasing work load by the remaining employees. Before they were informed that the stores are closing down, the employees had to work beyond their working hours and because of that, there was widespread dissatisfaction among the employees. A significant issue that the workers have had with the managers is their lack of empathy and seemingly no sense of remorse in cutting pay and docking salaries.

A critical point of negativity for the employees was the fashion in which they were terminated. According to the employees who were willing to discuss this, the managers terminated the employees via conference calls and via conference video calls. This was an emotional offence for the employees as they felt they were owed more courtesy and decency, especially those employees who’ve been working in the store for more than a decade.

4. Recommendations

The paper was explanatory in nature and not centered around reform. Additionally, the researchers are not in any way responsible for the management at Debenham’s. Hence, this section will consider the macro-implications of 2020 on the retail industry of the UK and try to understand if there were better ways through which the company could have handled the termination of its employees better. However, before that the report will investigate the key findings of the research and attempt to link the issues that came up in the study.

4.1 Key Takeaways from the Research

The research mainly concentrated on the impact of 2020 on the retail industry. The reason that the year 2020 was chosen for this particular research was because it was a year of deep economic and socio-cultural shifts and several factors had a deep economic impact on the retail industry of the UK.

The report’s research was held back due to several reasons; predominantly due to the Corona Virus pandemic lockdowns the author could not undertake research in the field as initially planned.

A change of leaderships and some economic setbacks which the company could not spring back from gave it a definitive disadvantage, and because of this, the company could not bounce back from the issues that Brexit-induced uncertainty and the economic losses of the pandemic. There is evidence that because of the setbacks which were experienced during the COVID lockdown, there were several other primary and secondary sectors which were also affected. For example, in the primary sector, in the month of March, instability in oil prices led to a widespread crash in the oil market as the oil prices came plummeting down. An event like this isn’t isolated as the price crash led to animosity between Saudi Arabia and Russia (Nicola et al, 2020). Since the company used fuel for transportation and operations purposes, the loss incurred by the company would be significant. Additionally, employees would seek higher remuneration for the additional cost of driving to work (Economic Outlook, 2020).

Due to the absence of an online stores, consumers can make the decision to switch from the store they usually avail to another store, if the store doesn’t have an online presence (Pizzi and Scarpi, 2013). Repeated disappointment by brands could cause consumers to permanently change their brand preferences, and even if Debenham’s survived, they would have had to deal with the loss of a significant chunk of the customers which they had before COVID (Pantano et al, 2020). This is what happened with Debenham’s as they failed to take into account, quickly, the changing nature of the consumer’s needs. The store had scope to change its approach during COVID, providing something along the lines of an agile approach whereby they shorten the time between customer needs and their deliveries (Gordon et al, 2020). Changing production has shown to have a positive effect on the employment capacity of workers, in some cases even more freelance workers had to be hired to keep up with the demand (Chao et al, 2020).

Another important takeaway from the research was the discovery of the deep seated financial and emotional effects that the closing down of the stores had on its employees. The general population was aware that recession was a very likely scenario and it is difficult to provide good service by workers and managers (Tarki et al, 2020). In this scenario, ethical construct in the office culture should’ve been observed to ensure workers are committed to their jobs and remain positive towards their employees even when they are not employed with them (Koh and El’fred, 2004). Same is reiterated by Karnes (2009), who argues that empathy and social skills are important parts of being a leader in an organisation. Management was required to adjust the company operations in accordance to the current research and its indications. While people have become more accustomed to shopping online, they have also become more accustomed to waiting in lines and distancing, a phenomenon which could’ve been used by the management in order to reduce labour hours of the employees and subsequently, cutting down on losses (Hamilton et al, 2019).

5. Critical Evaluation

The purpose of this section is to reflect on the research process, to understand where the research could improve and the limitations.

5.1 Limitations of the Research

An obvious limitation which the author faced; it was not physically possible to access the research respondents in person as planned without breaching Covid-19 government safety regulations. The author was unable to conduct face to face interviews as part of the data collection to understand what the socio-economic impacts on the retail industry have been. The author has been forced to rely on (secondary) previously published works and government records in order to understand what the impact of Brexit and COVID 19 was on the retail industry in the UK to supplement the low response rate to the online survey. Similarly, to understand the reasons behind Debenham’s stores closing in the UK, it had to rely on official records and news pieces to trace the material upon which it based its questionnaires.

5.2 Difficulties Encountered During Data Collection

One of the key reasons why the data collection for this project was hindered was because employees were ambiguous about the privacy policy of the company. As employees, they knew that they were under certain obligations, because of which several employees were reluctant to disclose any information which they feel might make them liable to legal action from the company.

The research understands that due to the virtual nature of the data collected, it was dependent heavily on the respondent to provide as much honesty as possible and hope it was them who were filling out the responses. However, an advantage it has faced by doing research during COVID was that it was able to collect a significant amount of data in a short amount of time, a phenomenon which has been common in several important researches across the globe (Kupferschmidt, 2020).

5.3 Advantages of the Research Method Used

The advantage of using the research tool of a questionnaire was that it allowed the researcher to quantify data like age, designation, history with the company and so on and it also allowed for space whereby the individual could express un-quantifiable emotions, like how they felt when they were terminated from their jobs. Additionally, the advantage of using Survey Monkey for the purposes of collecting data was that the researchers and the sample did not, at any point, come into physical contact and that was advantageous as it is not advisable for individuals to physically meet anyone in this situation.

On-site research is neither safe nor advisable during the pandemic and the study constructed questions keeping in mind that they could be answered comfortably virtually (Wigginton et al, 2020).

5.4 Personal Takeaways

A significant lesson that research displayed was about the importance of the human side of corporate and the need for improvement in the business ethics and training programs in the human relations and leadership, especially in big retain chains like Debenham’s. The company needed a serious revaluation of its values regarding both HR policies towards and employees and economic practices.

Another insight that was gained in the duration of this project was that introduction of these policies may result in greater cooperation when there is an economic setback, and the absence of such may lead to sustained animosity.

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