Retail resilience may have improved in the UK among retailers and wholesalers who had already been preparing for Brexit and adapting to changing customer behaviour – leaving them well-prepared for Covid-19, a new study suggests.
The report, published by Barclays Corporate Banking, questioned more than 500 decision makers at retail and wholesale businesses this summer via YouGov.
Preparing for Brexit
Before Covid-19, the report found almost a third (31%) had changed their logistics to prepare for Brexit, 24% of firms had already been stockpiling for Brexit, while 28% had started to diversify their supply chains. One in four (39%) businesses said they felt that getting ready for Brexit enabled them to deal better with Covid-19.
The Covid-19 effect
The advent of the pandemic meant that half of retailers (50%) had to shift to further towards ecommerce – while 47% plan to make ecommerce a priority long-term. The pandemic has also accelerated a push towards local shops – opened by 24% of respondents. At the same time, 52% of wholesalers started to sell direct to consumers for the first time – and 18% plan to do so in the next year.
The research found that supply chains that previously took five weeks from start to finish, now take 10 weeks – a change that could mean businesses are already well-placed to deal with the challenges of whatever Brexit deal – if any – is finally agreed. Now, firms do not expect their supply chains to return to normal until at least March 2021.
Despite these constraints, 55% of retailers said they saw an increase in demand as a result of Covid-19. For 73% that meant temporary product shortages. The biggest beneficiaries were DIY and garden retailers, who saw sales increase by 74%, followed by food and drink retailers (+63%) and sports and leisure businesses (62%).
At the same time, 53% of wholesalers saw their business drop as demand from restaurants, bars and pubs disappeared – but 29% saw a significant increase in orders. That’s likely to have come as shoppers changed their buying behaviour and tried new lockdown hobbies.
Despite the upheaval, the Barclays report found that 44% of retailers and wholesalers felt well-prepared for Covid-19, while 19% felt the opposite.
Looking ahead to the end of transition
Handling the pandemic left retailers and wholesalers feeling more equipped for the end of the Brexit transition period on 31st December, the report suggests. Those feeling better prepared have had their supply chains stress-tested (54%) and as a result, made changes to it (47%). Meanwhile, 55% think the economic impacts of Brexit will not be as severe as those of the virus.
Karen Johnson, head of retail, wholesale and healthcare at Barclays Corporate Banking, 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. Businesses have been forced to make big changes, and it seems that as a result, they are more agile and adaptable than ever.
“With the pandemic still impacting businesses across the UK, 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.
“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. Ultimately, these are the things that businesses and their customers care about, and matter most for lasting success.”
But, says Barclays, while businesses have done all they can to adapt to the current situation, long-term priorities that were top of the agenda last year, have been put on the backburner.
Nearly half of retailers and wholesalers (46%) are concerned about supply chain standards, but only 16% plan to prioritise them over the next two years. And sustainability, which was also a top priority for over 50% of CEOs in 2019 is now a short-term priority for only 35% of businesses.