The opportunity for ecommerce is growing at a pace that could not have been precedent in previous years, and while growth brings great potential for innovation within retail, the last few years have been fraught with competition and challenges. The first half of 2022 has been no exception. Unfortunately, for both shoppers and retailers, we are experiencing the greatest disruption to the global supply chain since World War II. A melting pot of issues is causing this disruption, making the last six months of ecommerce trading difficult, and future trading prospects uncertain.
2022 so far has seen a decrease in direct COVID-19 concerns, with attention turning to the other elements causing concern for the supply chain. In addition to the rising cost of living and continuing Brexit complications, we are still not out of the woods.. COVID-19 continuing to cause widespread issues in 2022 has shown us that while it may not be a hot topic for the media, it has had a lasting impact on business and retail – though some of the movement is positive. The most clear trend is that the move towards ecommerce, over bricks and mortar retailing, may be slowing down, but is here to stay. It is still too soon to say just how large the role ecommerce will play in the future is – some research states that worldwide retail ecommerce sales will exceed $5 trillion for the first time, accounting for more than a fifth of overall retail sales. As we globally continue to move out of lockdowns and large company shutdowns, results of how impactful the move to ecommerce has been may vary by sector, according to recent research. However, the other lasting impacts of the pandemic, such as staffing shortages, will also be present for the foreseeable future, and will continue to impact the retail sector.
According to 41% of shoppers, the most important attribute when shopping online is fast and reliable delivery. However, with supply chain complications and a shortage of staff, including delivery drivers, the last six months prove that this is no longer a guarantee – unless you are willing to dip into your pocket for a speedy delivery option, such as next-day. Even then, it cannot be guaranteed that your order will arrive in the selected timeframe, due to reasons out of the seller’s control. Unfortunately, issues have not ended there for retailers so far this year.
The most pressing and alarming ‘weak’ point in the supply chain, that is directly impacting UK retailers at present, is the outbreak of war in Ukraine, following Russia’s invasion in late February of this year, causing chaos for many businesses who had not yet recovered from COVID-19 complications. Not only have global materials and products been limited, there have been widespread delays reported, in addition to products becoming completely inaccessible via standard supply chain routes.
Many factories across the two countries have halted operations due to war, causing a mass decrease in production of certain goods. We have seen major companies, such as FedEx and UPS, suspend international operations in the region while many countries are looking to strengthen the control of their trading processes. Ukraine’s shipyards and main ports have become devoid of incoming orders or deliveries, with many carriers rerouting to alternate destinations.
We have seen large and impactful price hikes in gas, petrol, fuel and diesel prices, with outrage and annoyance palpable among citizens and motorists. Fuel prices continue to reach record highs, despite calls on the government to ease the woes felt by households, problems not isolated to the UK, but mirrored across the pond in Ireland, as well as mainland Europe. As a result, spending on discretionary items has seen a dip. In May, The British Retail Consortium (BRC) said total retail spending was 1.1% lower than a year earlier, the biggest fall since January 2021, representing an acceleration from April’s 0.3% decline. Some sectors have been harder hit than others; namely furniture, electronics, and other expensive goods, while fashion and beauty sales increased as people prepared for their holidays and summer events.
In addition to this, many retailers have been forced to hike up the prices of their own goods, as shipping costs rise and the supply of goods can no longer match the demand. With increased prices, and shoppers with less discretionary income, the retail market is still struggling. Brexit and trade barriers have further exacerbated issues for UK retailers looking to source goods from locations worldwide. Unfortunately, so far this year we have seen a multitude of barriers to effective trade, and little to ease the concerns of retailers moving into the busiest months of the year, with back to school shopping, Cyber Monday, Black Friday and seasonal shopping just around the corner. Many of these concerns are far from the retailers control, but they must do all they can to keep processes running as smoothly as possible, and, collectively, we must all adopt an optimistic attitude for the remainder of the year.