Are localised supply chains the future of retail?

8 September 2020

More than a quarter (27%) of retailers are looking to switch to local suppliers as a result of disruptions caused by the coronavirus pandemic, according to a report. 

The research, conducted by Barclays Corporate Banking, found the number increased to 38% for larger retailers that employed 500 people or more. 

Just under two-fifths (39%) of senior retail executives said their businesses had experienced supply chain disruptions as a result of coronavirus lockdowns.

Home improvement and DIY retailers were among those looking to localise supply chains, with over half (53%) detailing plans to do so, followed by sports retailers (33%) and entertainment firms (28%). 

Firms also cited reducing their carbon footprint and environmental benefits as reasons for having suppliers in closer proximity.

Almost a quarter (23%) said carbon reductions were a key reason for moving to local suppliers, and the same proportion agreed they would now only work with suppliers that have strong ‘green’ credentials.

A fifth (20%) said they believed the future of retail lay with local high streets, rather than city centres. 

The research showed retailers were moving towards more localised business operations, as homeworking and concerns over public transport and busy shopping areas look set to remain. 

One in seven (15%) retail businesses said they planned to reduce the number of physical stores they have in urban areas close to office buildings within the next year, with health and beauty retailers (28%), supermarkets (19%) and food and drink retailers (18%) most likely to do so in the next 12 months. 

Karen Johnson, head of retail and wholesale, Barclays Corporate Banking, said: “Retail was facing significant structural change as we came into 2020, and the pandemic has only served to accelerate this trend. In fact, in the past three months we have seen more change than we’d typically expect to see in a three-to-five-year period. 

“Whilst this rate of adjustment is a daunting prospect for the whole industry, if the results of our research tell me anything it’s that retailers in the UK are determined to meet these challenges head on.”

The report comes as Primark owner Associated British Foods revealed sales would be down 12% like-for-like compared to last year. 

The retailer said its four biggest stores in Birmingham, Manchester and London had been especially hard hit by coronavirus lockdowns. 

“If the four large UK destination city centre stores are excluded, the decline is 5%,” it added.

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