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Are local retailers and wholesalers more resilient than ever?

Posted: 12th November 2020

After years of big change from the rise in e-commerce, to preparing for Brexit, nearly half of UK businesses felt well-prepared for Covid-19

  • Firms in Scotland had already been diversifying supply chains (34%) and stockpiling (22%) due to Brexit.
  • Covid-19 has forced retailers across the UK to accelerate further change like shifting to e-commerce (50%) and setting up shop locally (24%).
  • Meanwhile, during the pandemic, 52% of wholesalers across the UK began selling direct-to-consumer for the first time.

Since the start of the pandemic, the disruption faced by businesses across the UK has been unprecedented.

A new report from Barclays Corporate Banking reveals this is especially true for the retail and wholesale sector, which has suffered extreme changes in its supply chains and consumer demand.

For both retailers and wholesalers, a key impact of Covid-19 was on supply chains. Before the pandemic, the average supply chain took five weeks from start to end but this has since doubled to ten weeks. Now, firms do not expect supply to return to normal until at least March 2021.

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

Whilst 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. This could have been down to consumers changing their buying behaviours and trying new hobbies during lockdown – with the smallest and largest wholesalers benefiting the most (32% and 43% experiencing a significant increase in orders, respectively).

Prepared for big change

The research reveals that retail and wholesale businesses in Scotland felt surprisingly prepared for the shock of Covid-19. Two fifths (39%) of retailers and wholesalers felt well-prepared, while a quarter (24%) felt the opposite.

For many businesses, major events in recent years meant they had no choice but to adapt. To prepare for Brexit, for example, many firms in Scotland had altered their logistics (29%), diversified their supply chains (34%) and began stockpiling (22%). As a result, nearly a third (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 Brexit transition period on 31st December. Across the UK, 55% of firms think the impacts of Brexit will not be as severe as those of the virus.

Euan Murray, Relationship Director and retail sector expert 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. 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 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.

“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.”

Adapt, adapt, adapt

Changing consumer preferences over the past decade have pushed businesses to go online, with the UK now home to the third largest percentage of online shoppers (80%) in the world[1]. Companies have also been ‘going local’, responding to over half (55%) of UK consumers who want to shop closer to home[2].

Covid-19 has accelerated this transition. One in three retailers across the UK (31%) have reduced their physical footprint this year, especially in city centres (29%) and nearly a quarter (24%) have moved into more local areas.

While a seismic shift to online was already ongoing, half of all UK retailers (50%) have increased their reliance on e-commerce and social media since March. A further 20% plan to ramp up their social media efforts in the next 12 months, while 17% say the same for e-commerce.

Wholesalers have in turn reacted. Over half (52%) of businesses across the UK 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 fewer than a third (30%) of wholesalers yet to take this step.

A new look for the market

With firms across the country expecting demand and supply to return to normal between March and May next year and 61% concerned that a second Covid-19 wave will cause further shortages, many will choose to cement these changes, leading to greater and faster change to the market. E-commerce, for example, is set to be a top priority for two fifths (39%) of retailers in Scotland in the coming years.

But 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.

For example, while a fifth of Scottish retailers and wholesalers (20%) are concerned about supply chain standards, only 10% plan to prioritise them over the next two years.

Sustainability, which was also a top priority for over 50% of CEOs[3] in 2019, has also taken a backseat with just 37% of Scottish businesses planning to invest in it as a priority going forward.

Business Comment

Business Comment is the Edinburgh Chamber of Commerce’s bi-monthly magazine. It provides insight on Edinburgh’s vibrant business community, with features on the city’s key sectors, interviews with leading figures and news on new business developments in the capital.
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