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EDITORIAL Does the supply crisis threaten retail’s recovery?

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UK retail appears to be recovering more strongly than many had forecast or dared to hope in dark days of the pandemic. However, the fall out from Brexit and Covid working in tandem could yet see that recovery falter.

On the face of it, retailers reporting their half year results for H1 21 paint a rosy picture. LEGO, starting to reap the rewards of an extensive – and expensive – digital transformation process has seen sales rise 36%, driven by online and digital experiences revamping where it fits in to the toy buying public’s phone-centric world view.

Fashion retailer Next has seen its overall sales grow by a more modest 8.8% in the first half, driven by an almighty 52% surge in online sales. The company is set for more growth as the year rolls on and it adds more retailers to its Total Platform scheme – joined by GAP the week before last – marking the shift towards offering a third-party marketplace for other brands. An interesting and timely strategy.

Pureplay DIY retailer CMO Group meanwhile has seen its online sales grow by 63% across the same period as it starts to reap the benefits of being a disruptor to the already burgeoning home improvements market.

Together, these retailers are having to rely heavily on online to prop up their sales. Whether that is a given for ever or because there is still some reticence to return to old habits remains to be seen.

What they all agree on is that supply chain issues are starting to bite. The petrol debacle this week is the tip of a large iceberg. Next reports that its stock levels are 12% lower than they were this time in 2019. It is looking to grow them for Christmas, but the fuel crisis and the shortage of foreign workers could yet derail that – for them and many other retailers.

With supplies and distribution potentially under threat, the news that consumers are more willing than ever this year to shop from overseas should ring alarm bells.

Driven by price and uniqueness, more than half are saying that they would look beyond their usual UK brands this peak. The worry about delivery times are there, but these are increasingly outweighed by getting a good deal. Now, factoring in that UK supplies may yet be low in the run up to the festive season, there could well yet be a greater move towards other retailers in other countries for goods.

It is early days and, hopefully, the supply crisis that is in the news this week is merely a continuation of a problem that has been rumbling along without the population noticing for some months. If, however, action isn’t taken to deal with it, then we could yet see Christmas, while not being cancelled, certainly a bit less festive than we all might have hoped.

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