30 BDO LLP | RETAIL FORECASTS REPORT 2021
RETAIL IN THE AGE OF COVID-19 CONTINUED
KEY SECTORS IMPACTED AND EXAMPLES Fashion – With China accounting for over a fifth of UK apparel imports (21.4% in 2018 according to UN Comtrade data) the prolonged factory closures in the early part of 2020 resulted in delays in supply. However, there has been significant variance between individual retailers. For example, Joules, which relies on China for 90% of its products, and Primark, which has 500 Chinese suppliers, were considerably more impacted than Next, which sees only 27% of production come from outside of the EU. In the event, availability issues in spring/summer 2020 were quickly superseded by the problems of falling demand, but as customers return, fashion retailers will have to ensure they do not miss out on sales opportunities because of previously quick and reliable supply chains that can no longer be counted on. Health & Beauty – Limits on footfall and consumer inhibitions about visiting stores have pushed Health & Beauty businesses to look at new ways of delivering products, with Lloyds pharmacy partnering with Deliveroo to offer delivery within 30 minutes Electricals – Online specialist AO.com has been one of the retailers to speak out about the difficulties of working with international manufacturing suppliers during the pandemic. To avoid the time and resources required to put in place a system that could adequately cope with the challenges of demand forecasting, replenishment, promotions and product lifecycle management decisions, AO.com brought in external specialist technology to manage its inventories. Grocery – Consumer concerns about viral exposure from packaging and product surfaces are fuelling interest for both new materials that exhibit actively antiviral and antibacterial properties and for greater cleanliness and transparency in the supply chain process. Meanwhile, the increased demand for home delivery has led many retailers to forge partnerships with food delivery service operators, providing the means to offer customers ultra-fast, small- basket delivery options. Examples include Morrisons, M&S, Aldi, McColl’s and others partnering with Deliveroo. In September Tesco announced a partnership with drone technology start-up Manna, which would see it trial grocery delivery by drone.
NEW CHALLENGES FOR SUPPLY CHAIN & DELIVERY LOGISTICS
The COVID-19 pandemic has exposed the vulnerabilities of supply chains, with many retailers suffering from product shortages due to global supply chain disruption. This has been exacerbated by massive increases in demand for home delivery, placing further pressure on retailer’s logistical infrastructures. Retailers forging supply chain and fulfilment partnerships, both with other retailers, and other companies, is a trend that pre- dated the pandemic. However, there has been a substantial increase in activity to meet the increased demand for home deliveries as consumers avoid the shops and spend more time at home. A host of issues, including concerns around joint brand management, revenue sharing and employment regulations, will arise in the longer term, as traditional retailers and food delivery organisations continue to blur channel lines. The growing demand to deliver to homes is also giving companies a problem in terms of potentially increasing their carbon footprints, at a time when they are increasingly expected to be reducing them. To counter this, they are having to turn to technology, including lighter and more fuel efficient vehicles, while IKEA is among the retailers to take this a step further, pledging to make all of its deliveries by electric vehicles by 2025. Elsewhere, Amazon continues to push consumers to group multiple orders into fewer, or single, deliveries. At the same time, trust issues and demand for greater provenance are pushing retailers into sourcing more products locally, while shopper expectations are also growing in terms of labelling, packaging and transparency.
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