More than a quarter of UK retailers are just four weeks away from going bust due to supply chain issues, with 85% of retailer businesses saying they have been hit by supply chain issues in the past year – almost half of shops and ecommerce brands (46%) have experienced stockouts, resulting in a loss of sales.
The crisis is so severe that 26% of sellers are in danger of running out of cash within four weeks if things do not improve, threatening their survival.
The data, from a survey of 500 retailers by Brightpearl, shows that shortage of goods was the biggest supply problem, experienced by 68% of respondents. Other issues included increased shipping costs (suffered by 64% of firms polled), lengthier delivery times for products (54%), suppliers selling out of stock (46%) and the increased prices of raw materials (40%).
The hardest hit sector was luxury goods, with 92% of firms experiencing difficulties getting stock. Other sectors strongly impacted included DIY & gardening (73% experienced problems), sports and leisure (60%), electronics (53%) and fashion and footwear (50%).
Almost three in ten firms (28%) said supply issues or distribution failure was the biggest threat to their viability – by far the highest response, beating poor cash flow (18% of firms said this was the biggest risk) and customer retention (16%).
Supply chain problems have added 21% to the average retailer’s costs in the last year, according to the survey. Almost six out of ten sellers (58%) have put up prices as a result and 29% are taking a margin hit to keep prices stable while 28% are trying to source products domestically to limit the impact.
Only 16% of retailers are planning to invest in technology or new vendor partners to limit the damage caused by supply issues.
Four out of ten retailers are extending online delivery times due to the issues.
Shoppers’ brand loyalty is being eroded by the crisis and 37% said they had bought from a new brand in the last year because an item was out-of-stock at their regular supplier.
Brightpearl CEO Derek O’Carroll says: “We are in the worst supply chain crisis that any of us can remember and there is no sign of the problems easing before the end of the year. For retailers, the problems could be particularly severe as they prepare for autumn and peak trading in the months building up to Christmas. We are still in the relatively early stages of this crisis with the impact of the war in Ukraine and other global factors only just starting to really hit home. UK firms are going to need to plan for months of further turmoil and issues over stock, which can result in unhappy customers and major cash flow issues. There’s no doubt, online firms’ inability to predict demand and manage stock is the number one risk to their long-term health.
He adds: “It doesn’t need to be that way. The key message is get your demand planning right, and utilise tools and technologies that can help. It will underpin purchasing of goods, marketing and pricing strategies, staffing levels and ultimately support business growth. At the same, it’s important to be honest with customers who are well aware that we are in a global crisis and will be more tolerant of delays than they would be in less turbulent times.”
