A new survey suggests that more than a quarter of retailers in the UK could be just four weeks away from going bust due to supply chain issues.
Brightpearl, a provider of demand planning software, found that 85% of retailer businesses have been hit by supply chain issues in the last year. Meanwhile, almost half of shops and e-commerce brands (46%) have experienced stockouts, resulting in a loss of sales.
The crisis is so severe that 26% of sellers surveyed said they were in danger of running out of cash within four weeks if things do not improve – threatening their survival.
The study found that shortage of goods was the biggest supply problem – experienced by 68% of respondents. Other issues included increased shipping costs (suffered by 64% of firms polled), lengthier delivery times for products (54%), suppliers selling out of stock (46%), and the increased prices of raw materials (40%).
The hardest-hit sector was luxury goods, with 92% of firms experiencing difficulties getting stock. The DIY & gardening sector was also impacted, with 73% of firms experiencing problems, whilst sports and leisure (60%), electronics (53%) and fashion and footwear (50%) also reported issues.
Furthermore, 28% of respondents said supply issues or distribution failure was the biggest threat to their viability – by far the highest response, beating poor cash flow (18%) and customer retention (16%).
The survey found that supply chain problems have added 21% to the average retailer’s costs in the last year. 58% have put up prices as a result and 29% took a margin hit to keep prices stable, while 28% are trying to source products domestically to limit the impact.
Brightpearl CEO Derek O’Carroll, said: “We are in the worst supply chain crisis that any of us can remember and there is no sign of the problems easing before the end of the year. For retailers, the problems could be particularly severe as they prepare for autumn and peak trading in the months building up to Christmas.
“We are still in the relatively early stages of this crisis with the impact of the war in Ukraine and other global factors only just starting to really hit home.
“UK firms are going to need to plan for months of further turmoil and issues over stock, which can result in unhappy customers and major cash flow issues.”
He added: “It doesn’t need to be that way. The key message is get your demand planning right, and utilize tools and technologies that can help. It will underpin purchasing of goods, marketing and pricing strategies, staffing levels and ultimately support business growth. At the same, it’s important to be honest with customers who are well aware that we are in a global crisis and will be more tolerant of delays than they would be in less turbulent times.”
NAM Implications:
- Inevitable…
- The key is the impact on your business of a customer going bust.
- Vital that you and your colleagues calculate the incremental sales required to recover losses when a customer cannot pay.
- i.e. take the average amount owed, divide by your net margin and multiply by 100…
- Circulate the result to your colleagues…
- …and prepare appropriate action.
- (then do it for all customers…)
