New research has revealed a number of UK retailers are experiencing supply chain disruption as a result of the coronavirus (Covid-19) outbreak, which began in China at the tail end of 2019.
Research from consultancy firm Retail Economics and global law firm Squire Patton Boggs suggests more than half of retailers surveyed have already experienced supply chain issues as a result of the coronavirus.
Almost a quarter of retailers surveyed (24%) – ranging from food, fashion and health & beauty businesses – say that supply chain disruption is having a “significant” impact on their business. Yet only 7% of them have flexible enough supply chains to be able to switch suppliers.
If the virus persists, around a quarter (24%) of the retailers asked, believe it could lead to a permanent change in their business, including switching suppliers, investing more into online operations, reviewing contracts, and risk mitigation. Meanwhile, 31% say they are concerned about continuity of supply.
But above supply issues, retailers are most concerned about the damage the virus could have on consumer confidence. Almost half (45%) of retailers surveyed have seen a negative impact on sales already, while three quarters (75%) of them expect a negative impact on sales if the virus persists.
Of consumers surveyed, 25% say they would avoid shopping destinations if the virus persists. However, one area that could stand to benefit is online retail, with half (49%) of shoppers saying they would consider buying more online to avoid physical shops if the virus persists – although one in two would try to avoid buying online from international sellers that ship products directly from China.
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By GlobalData“Retailers are battling against significant disruption to supply chains as the coronavirus has choked off production in China,” Richard Lim, CEO at Retail Economics, says. “While the impacts may not yet be apparent on shop shelves, around a third of retailers suggested that continuity of supply is currently their biggest concern. Of even greater concern for other retailers is the impact on consumer confidence and the effect this will have on their behaviour.
“The proportion of consumers currently avoiding international travel, using public transport and going to shopping destinations have all risen sharply over the last two weeks. Almost half of consumers say they will avoid international travel if the virus persists, while a third will avoid public transport and a quarter retail destinations.”
Matthew Lewis, head of retail at Squire Patton Boggs, adds: “Maintaining an effective supply chain and an operational workforce is critical to retail and to the long-term health of the sector and the wider economy.
“The most staggering result shows that just under 45% of retailers and those operating in the supply chain do not have the option to switch suppliers to mitigate against the impact of the coronavirus. This raises serious concerns about business continuity. It is not too late and retailers should look at their supplier contracts.”
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