Around $31.5bn of European retail trade will be onshored in the next 12 months following Covid disruptions, according to a report.
The report, by professional services firm Alvarez & Marsal (A&M), said a survey found more than two-fifths (42%) of the largest European retailers planned to onshore to mitigate supply disruptions.
A&M asked 30 large retailers across the UK, Germany, France, Switzerland, Spain, and Italy to estimate the proportion of trade they expected to onshore and combined this with historical trading data to arrive at the $31.5bn figure.
Germany was shown to have the highest expected shift to domestically-sourced products, with a total of $11.2bn.
The report said: “The impact of Covid-19 has exposed the over-reliance on single suppliers and single-country supply routes for many businesses, forcing them to consider supplier diversification and even dual-sourcing to ensure supply continuity.”
Estimated retail trade expected to be onshored within the next 12 months:
Germany – $11.2bn
France – $5.9bn
UK – $5.5bn
Italy – $3.5bn
Spain – $3.4bn
Switzerland – $1.8bn
Products included food, clothing, electricals, homewares, furniture and flooring, DIY and gardening, health and beauty, toys and games.
The report involved surveys, interviews and market research with the retailers, who had a combined turnover of $600bn.
Around seven in 10 retailers have reviewed their supply chain due to the weaknesses revealed by the pandemic, as well as pressures around Brexit, sustainability, shifts in technology and volatile geopolitical environments.
Since the pandemic 14% have started onshoring trade, while almost a quarter have started nearshoring.
Over half (55%) have begun diversifying suppliers and a similar proportion (53%) will be diversifying the countries they source from in the next 12 months.
Higher costs and lack of supply were highlighted as the main two barriers which could prevent onshoring for firms.
There was also a difference in adaptability between food and non-food retailers, with agri-food supply chains appearing “more flexible for switching suppliers and sourcing countries”.
Tim Waters, MD and European supply chain practice lead at A&M, said onshoring operations would help to “create more ethical supply chains and manage future risk”.
“The impact of the pandemic has been felt throughout retail supply chains across the world. Despite significant distress and disruption, Covid-19 has also acted as a catalyst for change for retail businesses, with evolving consumer behaviour, ESG commitments and technological potential leading new strategic thinking,” he added.
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