Bumps in the roadmap

This week, the UK Government and the devolved powers confirmed plans to ease Coronavirus restrictions in the coming weeks, largely starting 19^th July. For retail, this is another step in an ever-evolving picture of change since the pandemic started – of restrictions tightening and loosening based on the public health situation. Against this positive backdrop, retailers are facing challenges that will set the tone for needing resilient and flexible operations over the summer.

Firstly, labour shortages are causing significant challenges in supply chains. The most pertinent pinch point at the moment for retail is HGV drivers, which is leading to concerns of food shortages, a paucity of Haribo, and crisis talks between government and the industry. As businesses and supply chains all over the world ramp back up, bottlenecks and shortages are becoming frequent, pushing up inflation which has increased to 2.5% this month. The hope is that these are ‘transitory’ – teething troubles as supply chains splutter back to life. However the labour challenge could take longer to rectify (it’s thought that the number of qualified lorry drivers in the UK has shrunk by 100,000 since the pandemic began) and may drive retailers and distributors look for innovative ways to move goods around to offset the cost, which threatens to entrench upwards pressure on inflation, threatening consumer sentiment and demand.

Alongside this, retailers will have choices to make as to how to best cater for shoppers as COVID-19 legal restrictions end on 19^th July and decisions will be left up to individuals and organisations as to how to approach guidance. As we go to press, Unions have expressed concern for staff safety if mask wearing isn’t encouraged, and Tesco, Sainsbury’s and Waterstones have said they will politely encourage customers to do so. Retailers have shown agility and nimbleness since the pandemic began in reacting to changing legislation – now they’ll have to take that same approach and react to customer and staff sentiment as this changes over time, outlining expectations for their staff and customers whilst also trying to maintain clarity and consistency in the messaging.

Finally, as we begin to look forward to the new normal, the competitive landscape looks set to continue to evolve. As winners and losers emerge from the pandemic, investment is continuing in to the sector (with the Morrisons takeover, and rumours of consolidation in the grocery on demand delivery space) recognising the work many companies have done in strengthening balance sheets during the pandemic. Alongside this, Amazon have raided the Tesco boardroom to grow their physical stores business, pointing to more change in a sector that never stands still.

Nick Hoenig