The UK retail and logistics industries are today warned to take action now to plan for the potential effects of the Covid-19 coronavirus. If the virus takes hold in the UK, retailers could soon see 40% of retail transactions taking place online, up from 20% at the moment, an industry specialist has warned. The Governor of the Bank of England says it is already having economic consequences in the UK.
David Jinks, head of consumer research at ParcelHero and a member of the Chartered Institute of Logistics and Transport, says that retailers are likely to be affected if stocks of items produced in China are severely reduced. Added to that, in the UK, shoppers may well steer clear of shops and town centres to lower their own risk of catching the virus.
“If it does take a hold in the UK shopping patterns are likely to switch rapidly,” he said. “We believe that the current ecommerce 20% share of overall retail sales could rise to 40% or higher if the UK suffers a serious outbreak.”
That growth in the online rate could come, however, as overall retail levels are affected. The warning comes at Mark Carney, outgoing Governor of the Bank of England said this morning, in his last television interview, that supply chains were being affected, while tourism was also hit.
“What we are picking up with some of our bigger companies and companies throughout the world is that it is spreading out through the so-called supply chain so when they use parts in components to product goods, for example at Jaguar Land Rover in the Midlands, things are getting tight,” he told Sky News. “Things are getting a little tight. There are countless examples of that. That also slows down activity. There’s less tourism, we see it on our streets. You know the direction – it’s slower, it’s down – but it’s hard to be precise at this moment about the magnitude and very importantly the duration. We just don’t know. There are heroic efforts being made to contain and treat the virus and treat it but we’re not out of the woods and in fact we have seen as of today more cases outside of China, the source, than in China.”
ParcelHero has put together ten steps that it says would help retailers and logistics companies to mitigate the effect of the virus, which has so far affected areas from China to South Korea, Iran and Italy. It says retailers, logistics and delivery companies should think ahead now to prepare for the possibility of sudden supply chain changes and to reassure staff and customers.
ParcelHero’s Jinks said: “Some experts are predicting the new coronavirus’ impact could be greater than the 1918 Spanish flu, and cause a larger recession than the 2008 crash. On the other hand, many health professionals are saying it is unlikely to have a greater effect than many typical global flu outbreaks. Whatever the truth, Covid-19 is already having a significant impact on global supply chains and trade; and everyone, from the largest international exporter, to the smallest man-and-van courier, needs to prepare for ongoing economic and social difficulties.”
The warning comes in the same week that Primark owner Associated British Foods said it had built stocks up of products made in China ahead of Chinese New Year and so was holding enough to cover several months – but in the long-term there could be shortages if supplies from China do not resume. It said, in a trading update: “We are working closely with our suppliers in China to assess the impact on their factories and supply chains and their ability to fulfil our current orders. If delays to factory production are prolonged, the risk of supply shortages on some lines later this financial year increases. We are assessing mitigating strategies, including a step up in production from existing suppliers in other regions.”
ParcelHero’s ten steps
1. Set up a central emergency team that’s able to communicate even when working remotely
2. Keep front line staff informed and reassured, from drivers who may be concerned about home deliveries to those working in potential risk areas such as Hong Kong.
3. Plan for a sharp, sudden uptake of home deliveries: if Covid-19 becomes established in the UK, shoppers are likely to want to avoid crowded shopping centres and may turn to home deliveries of goods and food for perhaps the first time.
4. Be aware of what stock will be in more – or less – demand. Face masks may be more sought after, and toys or electronic equipment from China may be less so.
5. Allow for significant delays in delivery services to China, since organisations from the UK Post Office to China Post’s Express Mail Service are seeing cancellations in services or delays connected to disinfection.
6. Review your client base and set priorities around customers that may need to change or reduce their transport requirements
7. Be aware which international companies may need to change distribution or sourcing patterns: copanies from Apple to Jaguar Landrover source essential parts from China
8. Be prepared for complete changes in global maritime shipping patterns
9. Be prepared for airfreight disruption, especially where logistics networks involve China
10. Maximise cash flow within business models that may need to be re-examined if there is a significant coronavirus pandemic.