Covid-19: Retailers face new competition from pivoted restaurants and bars

Growing numbers of restaurants and bars are pivoting their businesses to operate as retailers and many of them intend to continue with these new revenue streams once they are able to reopen as leisure organisations.

Among them is fast food chain Leon, which has been converting its outlet into mini-supermarkets, and Pret a Manger, which recently launched its own-branded ground coffee and beans to sell online via Deliveroo and Amazon, as part of its launch into retail.

Meanwhile, Vinoteca has reopened its West London site as a small upmarket food market, and many pubs have also followed including the Fuller’s owned Red Lion in London’s Ealing that is currently trading as a community store.

Likewise, independent operator Top Cuvée has turned its North London bistro into a retail unit under the name Shop Cuvée. It set up a website using the Squarespace platform and Shopify and initiated a delivery proposition via a local bicycle courier firm immediately after the lockdown came into force.

Local support

What has surprised these companies is the level of support they have received from local customers. Brodie Meah, co-founder of bistro Top Cuvée, says: “It’s been very busy from day one. The first week was crazy with locals wanting to give us money. They all wanted to help.”

Interestingly its mix of products has gone from initially being 70% ready meals and 30% other products including wines, but this has reversed and now ready meals are only 30% of sales as customers use it more as a regular grocery store. As many as 50% of orders are click & collect and this is supplemented by a fair amount of walk-in trade.

Such has been the success of the operation that sales are 25% greater than when it operated as a restaurant (albeit offset by lesser margins) and Meah says this has fundamentally changed the plans for the business: “Essentially we’ve created a new business and we intend to maintain it so we’ll look for a [dedicated] retail site near to the restaurant.”

A move into online grocery

It is a similar story for Lily Simpson, founder of healthy cafe and food brand Detox Kitchen that has two deli/cafes in central London, who says Covid-19 has prompted a complete U-turn in her business: “The plan was to open 10 sites over the next two years but this has gone completely out of the window. For the next 12 months we will only focus online.”

This means there is a high likelihood the two physical units will not reopen. “If we reopen them then, because the margins are so slim, footfall will need to be 80% of what we had before. And I can’t see it. We can’t afford for them to be loss-making,” she explains.

The confidence to make such a radical decision comes from the phenomenal take-up of the fruit and veg boxes that it launched online when it pivoted to retail after the lockdown kicked-in. The business had previously sold healthy food boxes online but Simpson acknowledges they were very expensive. When the much more affordable box was launched it was immediately lapped up by its 180,000 Instagram followers.

Within 48 hours sales overtook the previous box revenues and deli/café turnover combined. “We went from 500 online customers to 4,000 overnight and have since launched a second fruit & veg box as well as a range of ready meals. We’re also launching recipe kits,” says Simpson.

Boxes have also become a successful feature of Lyon’s Seafood & Wine Bar in  London’s Crouch End. Anthony Lyon, co-owner of the business, says he created a website with the help of friends and assigned an existing employee to handle deliveries within the local area.

Although repositioning the unit as a food store and selling goods online does not replace the lost revenues of the restaurant, Lyon says it has introduced vital new revenue streams that will be retained when the restaurant reopens – including the seafood boxes and wine boxes with some goods being ordered in specifically for retail.

“We’re still open!”

Running the business as a retail operation has also enabled Lyon’s to retain a presence in local customer’s lives. “We’ve been introduced to new people as every other place [nearby] is closed down. People have tried our take-away and now they can’t wait to come to our restaurant,” says Lyon.

This was very much the objective of Hugo Meyer Equerré, owner of cheese shop and bar Provisions in North London, who says: “We are very much a local business with 75/80% regular shoppers and we wanted to show them that we still exist and are not a sleeping business.”

He chose to close the physical shop/bar and instead set-up an online store using the Slerp platform and Stuart for deliveries. Orders are taken when the site ‘opens’ at 2pm for next day delivery or click & collect, with the split 40:60 at present. Revenues from this new arrangement are equal to those before lockdown but Provisions has suffered the loss of its sister wholesale business.

Equerré is sufficiently pleased with the online operation that he says it will remain in place after lockdown ends: “We’d not had time to add an online store previously but this time it was a necessity. We’ll continue with it and reach out to more customers, especially if our wholesale trade takes time to return. The impact of Covid-19 will last and people’s habits will be distinctly different and businesses will have to adapt.”

For food retailers it is clear that they will not only be competing against the established regular players in the future but now have a new set of competitors who will make things even more challenging.