Supply Chain – Retail Gazette https://www.retailgazette.co.uk Thu, 15 Aug 2024 07:50:44 +0000 en-GB hourly 1 https://www.retailgazette.co.uk/wp-content/uploads/2024/02/cropped-rg-logo-32x32.png Supply Chain – Retail Gazette https://www.retailgazette.co.uk 32 32 Global fashion retailers divert Bangladesh orders due to political unrest https://www.retailgazette.co.uk/blog/2024/08/bangladesh-fashion-brands/ https://www.retailgazette.co.uk/blog/2024/08/bangladesh-fashion-brands/#respond Thu, 15 Aug 2024 07:50:44 +0000 https://www.retailgazette.co.uk/?p=169632 Top global fashion retailers are moving orders away from Bangladesh due to turmoil around the fall of its prime minister Sheikh Hasina, the country’s manufacturers have reported.

Factories based in the world’s second biggest garments exporter were closed for days following an uprising last week, sparked by the former prime minister’s government clamping down on student protesters, the Financial Times reported. 

Clothes and shoes deliveries to Europe and North American for the winter season have been delayed due to weeks of violence in the country.

Factories have turned to shipping goods by air and working overtime to make up for its backlog extending as far as a month.



Exporters in the country said some major retailers had moved their orders for upcoming seasons to other south-east Asian suppliers, leading to global supply chain disruption.

Mamun Rashid, an adviser to garment manufacturers in Bangladesh, M said: “For the time being, we’re diverting 40% of our orders to Cambodia or Indonesia.”

Many global retailers rely on the country for its garments, including fashion giant H&M and sports goods retailer Decathlon.

Earlier this month, it was reported that H&M, Uniqlo and Zara were facing potential delays in receiving their latest clothing collections due to the current political unrest in the region.

Click here to sign up to Retail Gazette‘s free daily email newsletter

]]>
https://www.retailgazette.co.uk/blog/2024/08/bangladesh-fashion-brands/feed/ 0
Greggs unveils new national distribution centre to drive growth https://www.retailgazette.co.uk/blog/2024/07/greggs-distribution-centre/ https://www.retailgazette.co.uk/blog/2024/07/greggs-distribution-centre/#respond Tue, 16 Jul 2024 11:35:39 +0000 https://www.retailgazette.co.uk/?p=167392 Greggs has unveiled plans for a new national distribution centre in North Northamptonshire, in partnership with property developer Tritax Symmetry.

The proposed centre, which will be based at Symmetry Park in Kettering, includes 311,551 sq ft of logistics space on a 25.1-acre plot. The site is expected to open in the first half of 2027, subject to planning.

The initiative comes under the food company’s strategic growth plan, announced in 2021, which set out expansion targets requiring investment in significant supply chain capacity.



Greggs currently has 2,500 shops across the UK, hitting the milestone in May, with its growth plans targetting an estimate of more than 3,000 sites.

The brand said its investment would bolster its capacity to directly supply ambient and chilled products to its growing number of shops.

Tritax Symmetry is also seeking planning permission for an additional 100,000 sq ft to allow Greggs to expand its site further.

Click here to sign up to Retail Gazette‘s free daily email newsletter

]]>
https://www.retailgazette.co.uk/blog/2024/07/greggs-distribution-centre/feed/ 0
Supply Chain Leaders Dinner: Untangling supply chain disruption https://www.retailgazette.co.uk/blog/2024/07/supply-chain-leaders-dinner-untangling-supply-chain-disruption/ https://www.retailgazette.co.uk/blog/2024/07/supply-chain-leaders-dinner-untangling-supply-chain-disruption/#respond Tue, 09 Jul 2024 15:32:30 +0000 https://www.retailgazette.co.uk/?p=167071 Retail Gazette and InterSystems host dinner with retail supply chain leaders to discuss how to deal with disruption, embrace AI, and revamp network design.

Retail Gazette and technology provider InterSystems published a supply chain white paper last month dubbed ‘Forget last mile for a minute, it’s the first mile that needs transforming’ – and it was against this backdrop a dinner was hosted for retail and FMCG supply chain leaders.

Although delegates at the roundtable agreed the title statement does not tell the whole story, there was general acknowledgment more work needs to be done to untangle legacy technology and put retailers in a position to gain more control of their supply chains to deal with an uncertain economy and global commerce landscape.

During an in-depth conversation over drinks and a three-course dinner, guests indicated disparate data in supply chain systems provides a particular pain point for forward planning, while there was an suggestion many of the reactive changes made to supply chain networks in the pandemic are causing challenges today that are yet to be solved.

Representatives from a diverse range of companies, including drinks conglomerate AB Inbev, café chain Costa Coffee, high street mainstay Marks & Spencer (M&S), and grocer Sainsbury’s, took part in the roundtable at the salubrious Charlotte Street Hotel in London. Below, under the event’s Chatham House Rules, are some of the key themes to emerge from the debate.

Legacy spaghetti on retailers’ plates

Despite the headaches supply chain professionals have encountered in the last decade – from the uncertainty and administrative burden caused by the UK’s exit from the European Union and a pandemic that turned commerce on its head, to the subsequent political and economic instability – the conversation went straight to operating models.

There was an acknowledgement retail supply chains are more complex that ever before, and need combing through in order to position organisations in this industry for change and improvement in the future.

The concept of “legacy spaghetti”, whereby retailers are dealing with multiple systems and solution providers, and disparate data points, was said to be a common problem across the wider industry.

“Operating models have typically been built by necessity rather than design,” explained one retailer, talking broadly about the state of the retail industry.

“The back-end of the retail supply chain has not been neglected, but many years of decision-making and new ideas and installations have caused difficulties.”

Discussion turned to the pandemic and how so many of the quick decisions to enable business to carry on during the crisis now need to be unpicked. This, it was said, takes up a significant amount of supply chain transformation teams’ budget and energy.

“People focused on bringing systems in during Covid but not getting them to talk to each other,” was one comment that received several nods around the table.

One guest spoke about master data management as a key focus area for their organisation, while another bemoaned the challenges that arise with inconsistent data pools, adding that accuracy of data is fundamental to being able to be better at planning.

AI in the retail supply chain

And it is strong data management and orchestration that is required if the advancements in artificial intelligence (AI) that have come through in the last 18 months are truly going to be put to good use in retail supply chains.

Conversation around AI – from both the delegates and the event sponsor, InterSystems – were measured and realistic, which guests found refreshing because this can often be a subject infused with hyperbole.

“What most retailers are doing with AI at the moment – and most organisations in general, actually – is very basic,” said one guest.

Another added: “You have to be really confident in your data and have all the information in the right place to be able to use AI properly.”

One retailer noted: “AI is on our roadmap but we need to define what exactly AI is – at the moment it is spoken about far too generally.

“First of all, retailers need to make clear what the business requirement is and then they should work out how AI can help. That’s the order in which the conversation around AI needs to go, and perhaps isn’t at the moment because it is such a buzz word.”

Leadership and appetite for change

One retailer even agreed c-suite interest in AI could help organisations map out wider change – they explained using the “buzzword” of these times in business cases can help transformation teams get a lot more work signed off by senior management than they otherwise would be able to.

Regardless of such potentially clandestine negotiations taking place, there does appear more willingness among retail c-suites to enact supply chain transformation, according to the roundtable guests.

“The pandemic made leaders realise orchestration of supply chains was crucial,” said one attendee.

And there is an openness and desire among some of the biggest retailers in the UK that restructuring of the first mile of the supply chain is vital for future success. They said this was highlighted by the popular retailer move to employ transformation directors, and also illustrated by the likes of Sainsbury’s and M&S mapping out these plans in their latest publicly-announced company strategies.

Perhaps indicating why this is such an important area to consider, one roundtable guest suggested: “No retailer has yet got it completely right in terms of how their supply chains serve online and stores in tandem.”

Mark Holmes, senior adviser for global supply chain at InterSystems, and co-host of the roundtable dinner, commented: “The supply chain complexities we’ve been living through over the best part of a decade are far from resolved, and the discussions we’ve had with retailers make that only too clear.

“But the road to enhancement, and future and ongoing supply chain success from the first mile all the way through that final point of consumer interaction, comes with better data orchestration and focusing on the foundational tech stack.”

He added: “We at InterSystems can help companies with that – and once they are working with us, they find further opportunities to drive change by optimising use of AI and sophisticated automation techniques.”

Read more on these subjects in the Retail Gazette-InterSystems white paper called ‘Forget Last Mile, It’s the First Mile That Needs Changing’

Click here to sign up to Retail Gazette‘s free daily email newsletter

]]>
https://www.retailgazette.co.uk/blog/2024/07/supply-chain-leaders-dinner-untangling-supply-chain-disruption/feed/ 0
Evri close to sale as Yodel seeks rescue funding https://www.retailgazette.co.uk/blog/2024/06/evri-yodel/ https://www.retailgazette.co.uk/blog/2024/06/evri-yodel/#respond Mon, 24 Jun 2024 10:35:21 +0000 https://www.retailgazette.co.uk/?p=165607 Two major players in UK parcel delivery, Evri and Yodel, are in the middle of significant financial manoeuvres. 

Evri, one of the UK’s largest parcel delivery companies, is the focus of a heated auction. Top private equity firms such as Apollo Global Management and Platinum Equity have submitted initial offers, according to Sky News with Evri’s valuation is pegged at approximately £2bn.

The auction, managed by Rothschild bankers, has attracted a mix of private equity and strategic bidders.

Evri, which rebranded from Hermes in 2022, boasts a vast network of more than 20,000 couriers and more than 14,000 ParcelShops and lockers, servicing major retailers and online platforms such as Etsy and Vinted.

It has been owned by Advent International since 2020 and commands a near 20% share of the UK market, delivering over 700m parcels annually.

This surge in interest coincides with the ongoing privatisation of Parcelforce’s parent, International Distribution Services, which also owns Royal Mail.



Meanwhile, Yodel – known for its partnerships with clients such as Argos and Very Group – is actively seeking new funding just months after narrowly avoiding collapse.

Sky News reports that Yodel is in discussions with various potential investors, including Paypoint, which is considering injecting around £10m into the company.

This move forms part of a broader recapitalisation strategy, with other investors potentially contributing between £10m and £40m. Talks could conclude swiftly, with a deal possibly being finalised as early as Friday.

The funding the acquistion of Yodel by a consortium led by logistics tech platform Shift and merchant bank Solano Partners earlier this year. 

Yodel delivers more than 190m parcels annually and generated £561.8m in revenue last year, adding new clients such as eBay and Boden. It is in the process of integrating technology from Shift to modernise its operations.

Click here to sign up to Retail Gazette‘s free daily email newsletter

]]>
https://www.retailgazette.co.uk/blog/2024/06/evri-yodel/feed/ 0
PrettyLittleThing deactivates customer accounts due to high returns https://www.retailgazette.co.uk/blog/2024/06/prettylittlething-returns/ https://www.retailgazette.co.uk/blog/2024/06/prettylittlething-returns/#respond Sun, 23 Jun 2024 11:28:08 +0000 https://www.retailgazette.co.uk/?p=165553 PrettyLittleThing has deactivated some customer accounts due to “unusual high returns activity” with those impacted turning to social media to blast the fashion retailer.

The BBC reported that shoppers had been sent emails over the past few days to inform them their accounts had been reviewed and shut down so they would be unable to place any further orders.

Some customers impacted criticised the retailer on social media, blaming inconsistent sizes and quality for their decision to return items. One wrote: “I can’t help your clothes sizes are a joke and are awful quality”.



The move follows PrettyLittleThing’s introduction of a returns fee, which Retail Gazette revealed earlier this month. The fashion brand brought in a £1.99 fee on 3 June for users to send back their unwanted clothing, which will be deducted from their refund.

The charge also applies to its PLT Royalty members, who pay £9.99 for access to unlimited free delivery for a year. It follows on from PrettyLittleThing’s parent company Boohoo’s move to introduce a returns fee in 2022.

Fashion retailers across the spectrum have been stepping up efforts to reduce returns. Last month, online retailer Oh Polly introduced a new returns policy in a bid to clamp down on “repeat refunders”.

The fashion brand informed customers that the new policy will calculate the cost of returns based on their return rates, with some being charged as much as £8.99 to send back the entire order.

Click here to sign up to Retail Gazette‘s free daily email newsletter

]]>
https://www.retailgazette.co.uk/blog/2024/06/prettylittlething-returns/feed/ 0
UK retail sales to EU plunge post-Brexit https://www.retailgazette.co.uk/blog/2024/06/retail-sales-eu-brexit/ https://www.retailgazette.co.uk/blog/2024/06/retail-sales-eu-brexit/#respond Wed, 05 Jun 2024 10:35:57 +0000 https://www.retailgazette.co.uk/?p=164246 British retail sales to the EU have plummeted £6bn since Brexit, despite a flourishing European ecommerce market, new research has found.

While online retail is estimated to add £323bn of annual sales to EU economies, trade frictions from Brexit-related complexities are limiting this sales opportunity for UK brands and retailers, according to findings by Retail Economics and Tradebyte.

The value of non-food retail exports had fallen nearly 18% to £2.7bn since 2019, with the clothing and footwear sectors hit particularly hard, despite steep inflation softening the decline.

Brands and retailers have faced challenges, including escalated logistics costs, complications registering an EU entity for trading, and increased delays in an already competitive market.

Retail Economics CEO Richard Lim said: “The profound shift in the UK’s trade relationship with the EU has hit British brands and retailers hard.

“Successive waves of disruption caused by Brexit and the pandemic have significantly disadvantaged UK exporters who are having to navigate through increased friction and cost.”.


Subscribe to Retail Gazette for free

Sign up here to get the latest news straight into your inbox each morning 


The new trading relationship with the EU has led to a shift in operations. While apparel was previously a top three exporter for non-food retail, now health & beauty, electricals and DIY and gardening make up three quarters of UK retail exports to the EU.

Health & beauty, and DIY & gardening remain the only two categories to have witnessed a marginal rise in export values since 2019

Marketplaces have emerged as important platforms for UK brands and retailers to soften the impact of Brexit.

Retail Economics and Tradebyte noted online marketplaces now make up over two-fifths of the EU’s £322.6bn annual online non-food sales.

Lim said: “Marketplaces have emerged as a lifeline to tap into the EU market, which now account for over half of online sales among the most affluent young and middle-aged EU consumers.

“As UK retailers search for expansion into new territories, marketplaces have emerged as an important channel for growth, opening up new scalable market opportunities at low risk.

“International retail is a complicated space to be in, particularly for UK brands and retailers looking to sell in Europe post-Brexit. From language barriers to taxation and customs issues through to warehousing and fulfilment, these are not small obstacles to overcome.”

Click here to sign up to Retail Gazette‘s free daily email newsletter

]]>
https://www.retailgazette.co.uk/blog/2024/06/retail-sales-eu-brexit/feed/ 0
Getir and the rapid rise – and equally rapid downfall – of speedy grocery https://www.retailgazette.co.uk/blog/2024/05/getir-speedy-grocery/ https://www.retailgazette.co.uk/blog/2024/05/getir-speedy-grocery/#respond Thu, 09 May 2024 06:56:01 +0000 https://www.retailgazette.co.uk/?p=162196 As Getir exits the UK, adding yet another country exit to its roster, Vineta Bajaj takes a look at the meteoric rise and lightning speed downfall of speedy grocery.

Founded in 2015, Getir became one of the largest of more than a dozen rapid delivery companies, raising more than $5bn in VC funding during the pandemic.

DoorDash, Jiffy, Zapp, Gorillas and GoPuff all subsequently exploded onto the lockdown scene like a food delivery volcano fuelled by hope, greedy VCs and a misguided view of the future of grocery delivery.  

At its peak Getir, backed by Middle Eastern venture capital, was worth $12bn.  This is more than Morrisons and Marks & Spencer combined. 

At the height of rapid delivery demand in 2021, over $18bn was invested into speedy grocery companies through venture capital.  Gopuff raised $3.4bn and Gorillas, whose business model was based on that of Gopuff, raised $1.4 bn.

GetirAs of November 2021, Getir operated in all 81 regional capital cities of its home country Turkey as well as 15 UK cities, 15 Dutch cities, 7 German cities and 3 US cities with a total of 28 million downloads – streets ahead of its competitors.

The impact on workers and communities

Speedy grocery was running away with itself.  Turning a blind eye to the mediocre performances of longer standing competitors Deliveroo, Amazon and Just Eat, venture capitalists and start up CEOs forged their way to misguided glory, chasing mirages of untold successes down a dead end path. 

They seemingly gave little thought to the gaping holes in their business plans and the demand such rapid expansion would have on employees and local communities.

With heavily populated cities as their dominion, the only way for rapid delivery to live up to its name was through the use of dark stores.  Essentially a high street store with no shop front.  A mini boarded up warehouse next to your local coffee shop. 

In early 2022, there were 115 dark stores blighting New York’s five boroughs. 

Dark stores are fulfilment centres only.  There is no sense of community or local integration.  They are places for workers to grab their goods and go, and despite the fact workers are – unlike Deliveroo – fully employed and receive e-bikes, the truth is far from rosy with “highly casualised, intensive and often unsafe working conditions” seemingly normalised, according to Social Europe.

Work and labour is managed through algorithms as a way of ramping up delivery-time targets and orders per delivery with very little human interaction or empathy.  

A flawed business model and disregard for macro economic conditions combined with unsustainably high levels of funding and a workforce treated as canon fodder has led to the arguably, inevitable collapse of the pandemic’s bright stars.  

The downfall

In June 2023, just two years after a valuation of £9.6bn, Getir left France after filing for bankruptcy. It also announced that it was planning to leave Spain following a mass redundancy process.  By 24th August 2023, Getir had lost $1bn and cut 10.9% of its global workforce.   

Despite such significant setbacks, Getir confidently declared it was maintaining its operations in the UK, The Netherlands, Germany and Turkey.   

Yet less than a year later, Getir is pulling the plug in the UK as well as Germany and the Netherlands, costing 1,500 jobs in the UK alone.  Operations are now confined solely to the US and Turkey. 

The company simply did not live up to financial expectations after raising an enormous $1.3bn across three rounds of funding over the space of just 10 months.   

Although the biggest player in the market, Getir is not the only victim.  The market and consumer demand have changed with lightning speed with May 2022 being the crunch point. Huge expansion, rapid investment and growth have all dissolved in a matter of three years.  

US headquartered DoorDash had to swallow a net loss of $1.36bn in 2022.  London based rival Zapp reduced its workforce by 10% and pulled out of Bristol, Cambridge and Manchester. By mid-2022, Berlin darling Gorillas had withdrawn from five British cities including Manchester and Nottingham and found itself falling from unicorn to cut price acquisition in two years.   

Getir bought the company in December 2022 for $1bn after being valued just 10 months previously at $3.1bn.   

Smooth-talking tech start up CEOs persuaded cash rich investors that rapid grocery delivery would replace the traditional corner shop model during the pandemic and beyond. That they would effectively change the convenience grocery market.  

A dozen unicorns unwittingly galloping their way to mass layoffs, consolidation, market exits and cut price acquisitions before being put out to metaphorical business pasture.


Subscribe to Retail Gazette for free

 Sign up here to get the latest news straight into your inbox each morning 


So why didn’t it work?

As a concept, speedy grocery’s business model was flawed from the outset.   

The pandemic created a false sense of security for speedy grocery.  It was a bubble in many ways which created completely new consumer shopping patterns and a reliance on technology and home delivery for access to food not seen before or since.  

There are five generations of spending power in our society, many of whom are now struggling with the daily cost of living and simply can’t afford the premiums such ultra convenience brings to the table. Ironically people are now suffering from the macro-economic knock-on effect of the very thing which made speedy delivery, briefly, so successful.  

The margins on food are simply too low.  The delivery charge plus the margin is not enough to make a profit once the cost of fuel, warehousing operations, salaries, management staff, energy, advertising and office space are factored in.  Not to mention a business model built on the consistent fulfilment of low value orders.   

If rapid delivery firms charged the right amount for fulfilment to the customer that they actually needed to, even the laziest amongst us would simply walk to the corner shop. As people slipped back into their post-pandemic shopping habits, the companies began haemorrhaging money as consumer demand and profit fell.  

Start-ups turned a blind eye to the fact that Deliveroo, Amazon Fresh and Uber Eat weren’t exactly towering empires, but these companies have achieved comparable success.   

These successes hinged on the fact they were able to partner with major takeaway and grocery retailers. Deliveroo and Uber Eats have partnerships with Sainsburys, Co-op, Waitrose, Aldi and Just Eat partners with Tesco and Asda. Sainsbury’s customers can also order via the Just East app. 

The supermarkets’ rapid delivery arms were created in response to the likes of Getir but only as a small part of their long established online delivery services. 

With delivery promised in up to 60 minutes, the pace is slightly slower but it seems consumers are happy with this.  

Partnering with Deliveroo and Uber Eats has given the supermarkets and restaurants access to their own rapid delivery service by outsourcing the costs of technology and couriers.

Deliveroo gains access to a huge network of powerful partners plus an established customer base without the costs of food storage and warehouse operations. 

This approach seems like a win-win and a much more sustainable model.

So what have we learnt from the speedy grocery era?

We do live in an instant gratification society but this doesn’t come at any cost. Inflation and cost of living has forced us all to take stock and reassess our behaviours regardless of how busy we are.

Speedy grocery was an industry founded on greed, fear and consumer laziness, giving false hope to tech CEOs and venture capitalists that such rapid growth was sustainable.  But in a post-pandemic world we simply don’t need to pay a premium to have bananas delivered to our door in 15 minutes.  

At best, speedy grocery could be described as an interesting experiment from which valuable lessons have been learnt.  At worst, it was a moral melting pot with exploitation at its heart.

As Getir retreats back to home turf with its tail between its legs, the period of inevitable consolidation following an unprecedented boom is far from over.  

It seems rapid delivery’s only route for survival is to follow in the footsteps of Deliveroo and Just Eat by forging partnerships with more established supermarkets, restaurants and retailers.

What customers really want is satisfaction and good customer service.  But they also want choice.

So maybe there is a future for quick commerce but only as a small subset of a wider hybrid model as the doors remain open to new partnerships, continued acquisitions and consolidations.

Vineta Bajaj is CFO of pan-Europe online grocery firm Rohlik Group, and held various finance director roles at Ocado

Click here to sign up to Retail Gazette‘s free daily email newsletter

]]>
https://www.retailgazette.co.uk/blog/2024/05/getir-speedy-grocery/feed/ 0
Zara owner Inditex urged to publish full supply chain for ‘greater transparency’ https://www.retailgazette.co.uk/blog/2024/03/zara-inditex-publish-supply-chain/ https://www.retailgazette.co.uk/blog/2024/03/zara-inditex-publish-supply-chain/#respond Mon, 11 Mar 2024 10:59:26 +0000 https://www.retailgazette.co.uk/?p=157606

Investors behind Zara owner Inditex are calling on the Spanish fashion giant to make its full list of suppliers public so they can better assess any supply chain risks.

Unlike its rivals H&M, M&S and Primark, Inditex is an outlier among the major fashion retailers in not publishing which factories it sources.

While it publishes an annual list of suppliers it sources from in 12 of its core countries, it reportedly gives “no information” on individual factories, Reuters reported.

Regulators and investors want greater transparency and better disclosure from companies and fashion retailers in particular to prove that there is no forced labour in their supply chains, and that garment workers are paid decent wages.


Subscribe to Retail Gazette for free

 Sign up here to get the latest news straight into your inbox each morning 


Last week, Chinese fast-fashion giant Shein came under scrutiny as its UK arm breached company law after failing to disclose its ownership, a move which could disrupt its plans to consider a London floatation.

In the EU, disagreements have stalled proposed rules that would require all big companies to disclose whether supply chains harm the environment or use child labour.
Proposed sanctions for not complying could include fines of 5% of revenue.

Click here to sign up to Retail Gazette‘s free daily email newsletter

]]>
https://www.retailgazette.co.uk/blog/2024/03/zara-inditex-publish-supply-chain/feed/ 0
Red Sea attacks disrupt shipping for over 50% of UK retailers https://www.retailgazette.co.uk/blog/2024/02/red-sea-retailers-affected/ https://www.retailgazette.co.uk/blog/2024/02/red-sea-retailers-affected/#respond Mon, 26 Feb 2024 12:36:26 +0000 https://www.retailgazette.co.uk/?p=156424 Over half of retailers and exporters in the UK have been impacted by the Red Sea attacks disruption, the British Chambers of Commerce (BCC) has indicated.

The business lobby group found the cost of shipping a container from Asia to Europe has risen by up to 300% for some companies.

Meanwhile, logistical delays have also resulted in up to three to four weeks being added to delivery times.

Participants in the BCC survey of over 1,000 companies said the delays were creating knock-on effects, including component shortages on production lines and cashflow problems.

BCC head of trade policy William Bain called on the government to look into providing support for exporters during the Budget next week.

He said: “There has been spare capacity in the shipping freight industry to respond to the difficulties, which has bought us some time. And recent [government] data also indicates the impact has yet to filter through to the UK economy, with inflation holding steady in January.

“But our research suggests that the longer the current situation persists, the more likely it is that the cost pressures will start to build.”

Bain added: “The UK economy saw a drop in its total goods exports for 2023 and, with global demand weak, there is a need for the government to look at providing support in the March budget.”


Subscribe to Retail Gazette for free

Sign up here to get the latest news straight into your inbox each morning 


The news comes as retailers have been battling with supply disruption, as attacks on cargo ships by Houthi rebels in the Red Sea since November have delayed stock deliveries and forced many vessels to reroute around South Africa’s Cape of Good Hope.

The route can add an extra 10 to 14 days to cargo ships’ journey times compared to travelling through the Red Sea and the Suez Canal.

Earlier this month, Asos and Boohoo ramped up their nearshoring in light of the ongoing attacks on its container ships on the Red Sea and Suez Canal routes.

The fashion giants increased the sourcing of products from countries such as Turkey and Morocco, as well as domestically in the UK, to avoid the longer-lead times and inflated prices associated with shipping from Asia due to the rerouting the attacks have caused.

Click here to sign up to Retail Gazette‘s free daily email newsletter

]]>
https://www.retailgazette.co.uk/blog/2024/02/red-sea-retailers-affected/feed/ 0
The real impact of retail’s Red Sea crisis: delays, soaring costs and supply chain changes https://www.retailgazette.co.uk/blog/2024/02/red-sea-attacks-retail/ https://www.retailgazette.co.uk/blog/2024/02/red-sea-attacks-retail/#respond Tue, 06 Feb 2024 21:07:54 +0000 https://www.retailgazette.co.uk/?p=153516 Retailers have been battling with supply disruption as attacks on cargo ships by Houthi rebels in the Red Sea since November have delayed stock deliveries and forced many vessels to reroute around South Africa’s Cape of Good Hope.

The route can add an extra 10 to 14 days to cargo ships’ journey times compared to travelling through the Red Sea and the Suez Canal.

The lengthy detours have resulted in higher expenses and longer wait times for retailers

In fact, figures from earlier this month found typical shipping prices had skyrocketed 329% since November, Sky News reported.

But how are retailers dealing with the disruption?

The impact of the Red Sea attacks

The delays are hitting those that source from Asia hard with Next, Currys and Poundland among those that have flagged issues.

Poundland owner Pepco Group cautioned that the ongoing disruption could lead to supply issues in the coming months, revealing that the situation was leading to “elevated spot freight rates and delays to container lead times”.

The retail giant said it was facing “additional surcharges” from carriers because of the longer shipping routes.

“While there is limited impact on product availability currently, a prolonged issue in the region could also impact supply in the coming months.”

In January, Next boss Lord Simon Wolfson also warned of delivery delays, which he said might “moderate sales” if the disruption continued for a long period.

“A lot will depend on how long this goes on for,” Wolfson told The Guardian. “The extra sailing time eats into capacity in the network and we could begin to get constraints. At the moment it is an inconvenience not a crisis.”

Lord Wolfson Next CEO_headshot_PA 2
Next boss Lord Wolfson

However, more than a month later the disruption continues.

Gerry Power, head of country for supply chain consultancy TMX Transform says that the attacks are still adding “considerable” transit time for containers rerouting around the Suez Canal.

He believes the impact will be “felt more in the coming weeks” and says routes from Southeast Asia to Europe are suffering the biggest delays.

Already Asos has flagged that it is seeing extended shipping times, which can be as much as 10 days longer.

Power says stock issues should be expected across the industry. “The delays in shipping lines and rerouting of vessels may result in downstream inventory issues and out-of-stock items,” he says.

Which categories are the worst affected?

While the Red Sea attacks have thrown a spanner in the works across the retail industry, some sectors are more impacted than others.

Supply chain expert Patrick Lepperhoff, principal at management consultancy Inverto, believes the highly seasonal fashion sector could be hard hit.

“Retailers should be receiving their summer clothing lines about now and delivery delays are causing them difficulties. Electronics, furniture and DIY goods will also be impacted.”

Proxima executive vice president for procurement Simon Geale adds: “Goods that are smaller and have a higher profit margin may be switched to air freight, leaving the more bulky and low margin goods as the most exposed, for example furniture, consumer electronics, textiles and clothing.”

However, he highlights that ultimately, the worst affected goods “will be revealed by the resilience strategies that businesses have in place”.

So what are retailers doing?

Alongside the rerouting of cargo ships, retailers are making changes to navigate the challenges from the Red Sea attacks.

Accenture UK & Ireland retail strategy and consulting managing director Matt Jeffers explains that in the short term, businesses are looking at options to bring in goods from closer locations.

Asos and Boohoo have ramped up nearshoring, increasing sourcing from countries such as Turkey and Morocco as well as in the UK, to avoid the longer-lead times and inflated prices associated with rerouting from Asia.

Asos

Asos told Retail Week that it still uses the Suez Canal route for ocean freight shipments of longer lead products from Asia to Europe, reserving the use of faster routes for its trend-driven, seasonal lines.

Jeffers points out that one challenge is that many retailers will have already committed to the stock en route from Asia so will have to deal with excess stock issues once it arrives.

Geale adds that other options available to retailers include buying earlier and buying more, diversifying supply sources, and choosing alternative shipping routes.

However, he notes: “It’s important to remember that existing trade patterns are likely to be the most cost effective, as they are embedded into how a retailer operates today, so any deviation has a ‘bullwhip effect’ and cost implications.”

Longer term solutions for retailers

In terms of soaring costs, Phil Bulman, partner at management consultant Arthur D. Little, is hopeful that they won’t stay up for for a protracted period.

“If you look at stats they’re not as high as during the squeeze that came just at the end of Covid, and they went up and came down quite quickly.”

“Although I do suspect there will be a level of buffer that the freight companies will put in to cover this risk which could be for multiple years.”

He does believe that if the situation continues, freight insurance will rise and stay high due to “uncertainty and insurance companies responding to that history”.

He says: “It does feel as though with the Middle East generally we could be talking multiple years of this sort of issue flaring up which could mean this could happen more often.”

This willl likely lead to higher prices when the freight market does finally stabilise.

Beyond the price rises, the disruption has highlighted the vulnerability of global supply chains and the need for retailers to mitigate risks.

Geale says: “The World Economic Forum has labelled interstate conflict in its top five risks for the next two years when correlating likelihood and severity.

“Businesses must look at the situation in the Middle East, and indeed the war in Ukraine as a critical item on their risk registers. Planning accordingly for escalations will be key, as they will have profound consequences and could extend into oil prices and cyber security.”

Bulman believes that nearshoring will not be a short term fix but an increasingly common approach, particularly in fashion. He says: “In the longer term, companies that have been reliant on those shipping routes and reliant on shipping of products coming from further afield will consider nearshoring.

“Of course in some industries it won’t be possible but for some it absolutely will.”

Jeffers says that all retailers should have “backup capacities” in place to get stock from different locations or via different methods of transport.

“But in the short term, apparel retailers should work with suppliers to expedite the production of goods for the autumn/winter season of 2024 to ensure they have the right stock in place for what is a key moment for the industry.”

With the situation showing no signs of slowing, it looks as though retailers will need to stay braced for an indefinite period of disruption.

Click here to sign up to Retail Gazette‘s free daily email newsletter

]]>
https://www.retailgazette.co.uk/blog/2024/02/red-sea-attacks-retail/feed/ 0