The Covid19 pandemic has not lost its terror and is now also manifesting itself globally in disruptions to supply chains. As a result, the supply of both raw materials and semi-finished and finished goods has been delayed by several weeks in some cases and freight rates have increased by more than 500 percent in some cases.
Against this background, there has been talk in the press of both empty shelves in retail and problems for online trade. The hypothesis of the bevh, on the other hand, is:
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- Reliability: E-commerce as a sales channel is better suited to ensure supply even under the above restrictions, since consumers can switch to national delivery in the event of local bottlenecks.
- Predictability: E-commerce has prepared forecasts for the Christmas business at an early stage from the previous year’s figures and the ongoing development, including a drop in the figures due to the reopening of stationary shops, and was able to stock up in good time. Even if no retailer can completely escape the global trend, the effects should only have a limited impact.
To validate these theses, we anonymously asked our retail members about their current situation in October. By mid-November we had received feedback from about 20 percent of the members. The following charts show the current situation.
Virtually all online retailers in the sample are impacted by supply chain disruptions. These disruptions currently affect more than a third of the ranges, with individual outliers pushing the average up slightly to 37 percent. The median is two percentage points below the mean. A significant easing of the situation is not to be expected for the coming spring either. Admittedly, the median falls here, at 30 percent, to less than a third of all ranges; nevertheless, the median is almost unchanged at 35 percent.
However, it is clear that the ranges to be expected, such as electronic products or clothing, are not mentioned by a particularly large number of retailers. And even the retailers of such products see the Christmas business – with the exception of photo items – being less affected. The biggest problems in replenishment are packaging materials.
It should be added here as a limitation that the composition of the sample does not allow statements to be made about all businesses in online trading or about all product groups within the ranges mentioned, but in our opinion it is of great indicative importance.
It is all the more important to assess whether and to what extent the coming Christmas business will be affected. A good quarter of the retailers surveyed are not afraid of any impairments, the vast majority see only a small part of the potential demand in the most important sales period of the year at risk. Just under 12 percent of the participants see a large part of the Christmas sales at risk.
The obvious resilience results from the fact that the retailers can assess their needs very precisely due to the data transparency provided in online trading and, in the event of bottlenecks emerging, were able to increase the quantities of goods at an early stage or get them started in the supply chain. Almost every second retailer reports that procurement has been adjusted accordingly.
Eight out of ten of those surveyed planned with longer procurement periods and almost 70 percent increased their storage capacities in order to increase the ability to deliver from stock. The fact that a comparatively smaller proportion of retailers switch to other carriers or means of transport only shows that all transport routes – sea, air and rail – currently have similar handling problems.
Almost every third retailer refrains from adapting their advertising measures. However, four out of ten dealers point out to customers that they have to reckon with longer delivery times. Only about every fifth retailer refrains from marketing activities so that demand and availability do not differ too much. It is also interesting that vouchers – often presented in the media as the remedy of choice – are not yet widely accepted by the retailers surveyed in the approaching Christmas season.
As cautiously positive as the basic mood is, this cannot hide the directly noticeable commercial consequences. Not just this year, but especially next year. A good 35 percent of those surveyed do not see any effects or have built up buffers due to the strong previous business in order to achieve sales and earnings targets. Nevertheless, more than every fifth retailer expects a drop in sales and earnings in 2021 compared to the previous year.
However, where sales are still sufficient, the increased procurement costs will have a direct effect on the result. Cumulatively, two out of three traders assume falling results. And that is reflected in the expectations for the coming financial year. Two-thirds of online retailers still expect growth in 2022, albeit to a lesser extent. However, the results should be worse almost everywhere, and only one in ten respondents see no negative effects.
The employment policies of the companies are to be seen in direct connection – and as a positive sign for the economy as a whole. A good one in three participants is not planning any personnel adjustments, and almost another 40 percent even want to hire employees in logistics and purchasing. Only one in five retailers fears having to lay off employees – about as many as expect massive losses in the Christmas business.
The result shows that our hypotheses are supported by the survey, at least in essential statements. It cannot be ruled out that online retailers will have the same delivery problems as brick-and-mortar retailers for items that are particularly in demand – keyword “Playstation 5”. With good data organization, however, they should be able to provide reliable information about delivery times.
What is certain, however, is that the problems with the supply chains will continue to occupy our industry well into 2022. The higher freight costs and the container crisis will probably normalize again from the middle of the year. It will take longer for the flow of goods to run normally and reliably again – not to mention “just in time”. During this time, the amount of capital tied up in retail will increase significantly because retailers will have to stock larger quantities of goods, in the worst case by renting additional storage space. This puts a strain on working capital, which could be a hazard for small traders and a potential problem for retailers.
Source: bevh.org
