Scottish firms began stockpiling before COVID-19 in preparation for Brexit, Barclays finds
More than a fifth of retailers and wholesalers in Scotland were already stockpiling before the coronavirus pandemic in anticipation of Brexit, helping firms feel more prepared for COVID-19, according to a new report from Barclays Corporate Banking.
The report found that while the retail and wholesale sector has suffered extreme changes in its supply chains and customer demand because of COVID-19, many businesses in the sector in Scotland felt surprisingly prepared for the shock of the pandemic.
Two-fifths (39%) of retailers and wholesalers felt well-prepared, while a quarter (24%) felt the opposite.
For many businesses, major events in recent years meant they had no choice but to adapt. To prepare for Brexit, for example, many firms in Scotland had altered their logistics (29%) and diversified their supply chains (34%) As a result, nearly a third (29%) of businesses in Scotland felt that getting ready for Brexit enabled them to deal better with COVID-19.
In turn, handling the pandemic left retailers and wholesalers feeling more equipped for the end of the Brexit transition period on 31st December. Across the UK, 55% of firms think the impacts of Brexit will not be as severe as those of the virus.
Despite the disruption that the pandemic has caused, many retailers across the UK have been able to trade on, thanks to a huge surge in sales. Over half of all retailers (55%) saw an increase in demand, which for three quarters (73%) caused temporary product shortages.
Among those who saw the biggest increase in orders were DIY and garden (74%), food and drink (63%) and sports and leisure (62%) businesses.
Euan Murray, relationship director and retail sector expert at Barclays Corporate Banking, Scotland, said: “While retailers and wholesalers have had no shortage of challenges and complications over the past few years, there is clearly an upside for the sector. Businesses have been forced to make big changes, and it seems that as a result, they are more agile and adaptable than ever.
“With the pandemic still impacting businesses across Scotland, and the ‘return to normal’ likely to be a long way off, many of these changes will last, leading to long-term change for the market.
“While firms are in survival mode, they must not lose sight of their long-term priorities, like sustainability, and treating staff fairly at all levels of the supply chain. Ultimately, these are the things that businesses and their customers care about, and matter most for lasting success.”
Changing consumer preferences over the past decade have pushed businesses to go online, with the UK now home to the third largest percentage of online shoppers (80%) in the world. Companies have also been ‘going local’, responding to over half (55%) of UK consumers who want to shop closer to home.
COVID-19 has accelerated this transition. One in three retailers across the UK (31%) have reduced their physical footprint this year, especially in city centres (29%) and nearly a quarter (24%) have moved into more local areas.
While a seismic shift to online was already ongoing, half of all UK retailers (50%) have increased their reliance on e-commerce and social media since March. A further 20% plan to ramp up their social media efforts in the next 12 months, while 17% say the same for e-commerce.
Wholesalers have in turn reacted. Over half (52%) of businesses across the UK have begun selling directly to consumers since the virus began, cutting out the middleman for the first time. A further 18% plan to launch direct-to-consumer sales in the next 12 months, leaving fewer than a third (30%) of wholesalers yet to take this step.
With firms across the country expecting demand and supply to return to normal between March and May next year and 61% concerned that a second COVID-19 wave will cause further shortages, many will choose to cement these changes, leading to greater and faster change to the market. E-commerce, for example, is set to be a top priority for two fifths (39%) of retailers in Scotland in the coming years.
But while businesses have done all they can to adapt to the current situation, long-term priorities that were top of the agenda last year, have been put on the backburner.
For example, while a fifth of Scottish retailers and wholesalers (20%) are concerned about supply chain standards, only 10% plan to prioritise them over the next two years.
Sustainability, which was also a top priority for over 50% of CEOs in 2019, has also taken a backseat with just 37% of Scottish businesses planning to invest in it as a priority going forward.