From Kebabs to Manicures, London's a Bleak Place

(Bloomberg Opinion) -- Trade is looking even bleaker for businesses near London’s Liverpool Street station now that Boris Johnson is urging people to work from home for another six months.

Hipster kebab seller Butcher & Bab reopened two weeks ago in the hope of benefiting from a large-scale return to work this autumn, but sales have been down 65% from Monday through Wednesday and almost 80% on Thursdays and Fridays. The nearby Beauty Box is doing half the number of treatments as before the pandemic. And while Japanese curry restaurant Donburi saw demand pick up earlier in September, it fell away quickly last week after the new work-from-home directive.

Butcher & Bab co-founder Bijan Morvaridi summed it up: “The business is a shadow of what it was.”

London reflects the challenges facing city centers around the U.K. but also in France, Spain and Ireland where various local lockdown orders are curbing pub hours and restricting the number of people who can meet up to socialize.

The extended absence of nine-to-fivers from city office blocks and transport hubs spells potential catastrophe for those that serve them, from coffee and sandwich shops to convenience stores, gyms and hairdressers. By March, it will have been a year since this large-scale work-from-home experiment began.

In the U.K., retailers and restaurants are scrambling to slash costs and adapt in order to to cope with the drop-off in business. Britain’s ubiquitous sandwich, soup and coffee chain Pret a Manger has announced the closure of 30 stores and the loss of close to 3,000 jobs. Costa Coffee, owned by Coca-Cola Co. could cut up to 1,650 roles. Faced with earlier closing times, restaurants and bars are experimenting with opening earlier to make ends meet.

For businesses that are still closed, particularly those in city centers, the new restrictions mean they may never restart operations again, which could potentially lead to a spike in the number of vacant units. Only some 72% of shops and 69% of leisure locations in England have reopened, according to the Local Data Company.

Businesses are already innovating to keep customers loyal wherever they are. Pret a Manger started a new coffee subscription service that got 16,500 signups on the first day. For 20 pounds a month, subscribers get up to five barista-prepared drinks a day from any location, be it in the City or their home office.

Hair and beauty company Blow Ltd. was about to reopen its Covent Garden salon when the new work-from-home advice came. It’s focusing on its at-home mobile beauty offerings, which have rocketed, adding new services such as hair color to tackle those lockdown roots and expanding hair cutting to men and children so the whole family can get their hair done in one visit.

Some groups, including healthy fast-food chain Leon and baker Greggs Plc, best known for its sausage rolls, are already selling their products in supermarkets. More could follow. Pret, which is owned by JAB Holding Co., will start selling bags of coffee in Waitrose Ltd. stores next month and it’s planning a line of prepackaged food in partnership with other retailers in the new year.

These are smart moves. One-stop grocers are set to be big beneficiaries of remote employment, as Brits brew their own espressos and make their own lunch. But bags of coffee are likely to be less profitable than single skinny lattes.

Over the longer term, relocating may be one option for city-center businesses. New co-working spaces are springing up in suburbs to accommodate lonely home-based employees. Retailers and restaurants close by may thrive.

Office-heavy districts such as the City of London may also be repurposed over time into greener spaces with a wider variety of shops and leisure activities, reckons Bloomberg Intelligence analyst Sue Munden. Canary Wharf is a good example of how this could work. While its office buildings may be largely empty, the area has been enjoying strong weekend trade because it has a wide range of retailers that also serve a big residential population.

Such developments are still a long way off, however. While big established consumer brands have deep enough pockets to get through this crisis, smaller rivals will be less able to cope with the transition.

If things don’t improve, Butcher & Bab may have to consider moving to a more residential area. Doing so would be a difficult decision given it’s always served the central London lunchtime market since starting out as a street food business. “We know what it was like before,” Morvaridi told me. “It’s going to be really hard to give that up. But how long do you keep flogging a dead horse for? It’s tough. It’s demoralizing.”

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.

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