Retail sector updates
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UK retailers’ Christmas cheer is set to be rationed this year as logistical challenges both at home and in Asia will result in narrower product ranges and less discounting during the festive season.
Supply issues in food distribution have dominated headlines in recent weeks, but non-food retailers are encountering similar setbacks in planning and stocking up for their busiest period of the year.
“I’ve never seen such conditions in over 40 years of selling toys,” said Gary Grant, founder and executive chair of The Entertainer, which operates more than 170 toy shops in the UK.
He cited commodity inflation, high shipping costs, problems sourcing containers and constrained factory capacity among the issues he was facing.
Problems over the summer at some major Chinese container ports and the blockage of the Suez Canal earlier in the year have led to bottlenecks. “Factories in China are clogged up so they are only making stuff they have orders for,” Grant said.
One senior executive at a major retailer said his company was “working with suppliers to get the best things they have got, even if they are not always what we’d ideally want”.
“The period immediately after the pandemic is ironically proving more challenging than the full-blown pandemic,” he said. “We are about eight weeks behind [in terms of Christmas stock build] at the moment. There is of course a safety margin built into that, but if there are further disruptions there is not much slack.”
Grant also said his company was about 10 per cent behind where it would normally be, in terms of the number of containers received.
Even air freight is far from smooth because of reduced capacity on board passenger flights and additional Covid-related precautions introduced recently at many Chinese airports, which have reduced productivity and increased costs.
Toys are one of the most-affected categories, along with bicycles and large homeware items. Consumer electronics, where shipping is a smaller proportion of the overall cost, are less affected by freight problems but have been hit by a shortage of semiconductor chips.
The executive at the major retailer said it had chartered air freighters to move some product to the UK. “Obviously we don’t want to have to do that too often.”
Ikea said this week it was diverting some furniture being delivered to Europe on to trains to ease shipping constraints.
Gary Grant: ‘I’ve never seen such conditions in over 40 years of selling toys’ © Felix Clay/Eyevine
Although there is no overall shortage of shipping containers, freight rates remain elevated and containers are often stranded in the wrong places. Once they arrive in the UK, there is the additional problem of too few truck drivers to move them around.
Dan Myers, managing director of transport in the UK and Ireland at XPO Logistics, warned of a “tough” Christmas build-up for retailers unless the government changes its mind on not readmitting more EU-based drivers.
So far, ministers have resisted the suggestion from many in the retail, hospitality and logistics industries to add lorry drivers to the list of shortage occupations, which would allow non-UK nationals to work here and alleviate an estimated shortfall of 100,000 drivers.
“Already retailers are rationalising some of the ranges and reducing the delivery frequency,” Myers said. “Some are changing what would have been their historic peak plans to smooth it down and elongate it.
“It is going to make it a tough Christmas build. It will impact on availability.”
Andrew Opie, head of food and sustainability at the British Retail Consortium, said retailers were “taking all necessary measures to mitigate possible disruption”, including increasing pay for drivers and “bringing non-perishable goods in early or via alternative routes to avoid a last minute rush on shipping”.
Some retailers said ranges could be smaller and discounts less aggressive. “Black Friday will look pretty similar to previous years but there might be narrower choice of individual brands or products,” said the executive at the major retailer.
“We’ll also take a look at our promotional activity and think twice about anything we were going to do that could create a stock supply issue.”
Even retailers that are less dependent on Christmas trading, such as DIY group Kingfisher, are looking into next year with some trepidation given that the shipping issues in particular are likely to persist until at least the Chinese new year in early February.
“We have managed supply and demand during the summer season, which is now past its peak. Our priority is now to prepare ourselves for next year and our next peak seasonal period,” said the group.