Retail and wholesale supply chains “won’t return to normal until March”

Retailers and wholesalers do not expect their supply chains to return to normal until at least March 2021, according to new research which has revealed the extent of the problems caused by the Coronavirus.

Barclays Corporate Banking commissioned YouGov to survey 508 decision-makers at retail and wholesale businesses during August and September, finding that before the pandemic, the average supply chain took five weeks from start to end, but this has since doubled to 10 weeks.

A further 61% were concerned that more spikes and lockdowns will cause further shortages, making the switch to e-commerce a top priority for 39% of retailers in Scotland.

Despite this, many retailers across the UK have been able to trade on, thanks to a surge in sales. More than half of all retailers (55%) saw an increase in demand, which for almost three quarters (73%) caused temporary product shortages. Among those which saw the biggest increase in orders were DIY and garden (74%), food and drink (63%) and sports and leisure (62%) businesses.

While most UK wholesalers saw the opposite effect – with 53% experiencing a fall in demand due to the closure of restaurants, bars and pubs – nearly a third (29%) saw a significant increase in orders.

The research revealed that 39% of Scottish retailers and wholesalers felt well-prepared for the Covid crisis, while 24% felt the opposite.

Barclays suggested that this could have been down to existing preparations for Brexit, with firms in Scotland stating they had already altered their logistics (29%), diversified their supply chains (34%) and began stockpiling (22%). As a result, 29% of businesses in Scotland felt that getting ready for Brexit enabled them to deal better with Covid-19.

In turn, handling the pandemic left retailers and wholesalers feeling more equipped for the end of the transition period on 31 December. Across the UK, 55% of firms said the impacts of Brexit will not be as severe as those of the virus.

Euan Murray, relationship director at Barclays Corporate Banking Scotland, said: “While retailers and wholesalers have had no shortage of challenges and complications over the past few years, there is clearly an upside for the sector.

“With the pandemic still impacting businesses across Scotland, and the ‘return to normal’ likely to be a long way off, many of these changes will last, leading to long-term change for the market,” he continued. “While firms are in survival mode, they must not lose sight of their long-term priorities, like sustainability, and treating staff fairly at all levels of the supply chain.”

Covid-19 has also accelerated the transition from in-store to online, with 31% of retailers across the UK reducing their physical footprint this year, especially in city centres (29%). Half of all UK retailers have increased their reliance on e-commerce and social media since March, with a further fifth planning to increase social media efforts in the next 12 months, while 17% said the same for e-commerce.

As for wholesalers, 52% have begun selling directly to consumers since the virus began, cutting out the middleman for the first time. A further 18% plan to launch direct-to-consumer sales in the next 12 months, leaving only 30% of wholesalers yet to take this step.