As the nationwide COVID-19 lockdown forced offices workers into distributed teams and as working from home continued to stick (despite the British government's best efforts), Pret a Manger has become the primary example of how UK business will suffer if people continue to stay away from city centres.
Just a couple of weeks ago the sandwich and coffee shop chain, which is omnipresent on the streets of central London, announced that it would be making almost 2,900 job cuts and that 30 branches would be closing, following a 60% drop in sales compared to last year.
The brand has come to represent every retailer that relies on the footfall of office commuters in and out of Zone 1 on a daily basis to stay in business. What will these retailers and shop owners do if people continue to work in their local suburbs and don't pass their storefront every day?
Change, that's what.
The debate has been rife and the government has effectively taken out an advertising campaign to encourage people to get back to the office, despite the novel Coronavirus continuing to remain in circulation. The Confederation of British Industry recently said that the situation was so serious that half a trillion pounds could be wiped off the economy over the next four years if workers don't return to the office.
However, unsurprisingly, businesses that rely on knowledge workers have quickly come to realise the benefits of working in a distributed manner, have embarked on office closures and have introduced sustained working from home policies for the long-term.
So, if the trend is going to continue beyond COVID-19 (whenever that may be and whatever that may look like), what does that mean for the Prets of the world? It's worth noting here that not every business suffering has the scale of Pret and so what we are discussing here may not be feasible for, say, an independent bookstore in Soho - and the consequences for those businesses are much more uncertain.
But my view is that the change is happening, it will stick, and instead of the government intervening to reverse the trend (which it won't), this moment in time should be taken as an opportunity to rethink the economy and rebalance power away from the city centre. Money not spent in Zone 1 could mean money spent further afield - just because it's not concentrated in one spot, doesn't make it less valuable.
Equally, businesses need to quickly think about how they can capture the attention of this section of consumers and create loyalty with them over the long term as they adjust to their new working from home routine.
Pret makes a change
This brings us to the announcement made by Pret today that it will be introducing a new digital subscription service, which allows customers for £20 a month to have up to five coffees (and some alternative beverages) a day, seven days a week. Given the average Pret coffee costs approximately £2.40, a customer would only need to have around nine coffees a month to make their money back.
Pret boss Pano Christou told the BBC's Today programme:
There's no doubt that workers will come into the office less often than beforehand. Pret needs to adapt itself to the changes of customer patterns and that's where we've been very focused.
The coffee chain will be launching the YourPret Barista as part of a new digital strategy next week and comes off the back of Pret's online delivery business growing tenfold through the Coronavirus crisis.
Briony Raven, Pret's director of coffee and packaging, also told the BBC that the aim of the subscription service is to help persuade customers to see Pret as their go-to coffee choice. She said:
It's Pret's way of doing loyalty. It's about giving people an easy choice, when they come back into their everyday routine.
Undoubtedly the hope is also that if a buyer is tied to £20 a month for Pret coffee that there will be additional spend on other goods on top of that. As we've seen in other sections of the digital economy, everything from cloud computing to digital content, once a buyer is tied into a subscription, a certain level of stickiness (or loyalty) is created and tends to boost the chances of a long-term relationship.
And let’s not forget, annual recurring revenues are not to be sniffed at.
But the key takeaway here (excuse the pun) is that instead of Pret resisting the change in the hope that London's city streets will quickly return to normal before it goes bust, it is thinking about the market trends that are already in play and is quickly adapting to meet consumers where they are.
I believe that this is very much a sign of things to come. In many ways, it's surprising that this model didn't already exist for chains such as Pret. However, excellent digital services, subscription models and customer success are all going to be key to their survival.
That of course doesn't solve the problem of what to do with the city centre, but I'll save that for another blog post at a later date. But it does potentially provide a new model for companies like Pret to continue to thrive and I expect we will see more of the same from others. And if these large companies don't adapt, there is also plenty of opportunity now for small independents in local areas to reap the rewards. Hopefully there will be room for both.