Research published this week shows how badly business logistics were affected in the UK during the early phase of the pandemic. Warehouse outages, lost sales, and supply-chain cost increases all depressed revenue.
The research also highlights a consumer trend towards the dominant online platforms (such as Amazon), prompted largely by the standard-setting delivery/returns experience they provide.
The next few months pose a serious challenge to brands trying to protect revenue from the further effects of the pandemic. The holiday season (Black Friday, Cyber Monday, Christmas, New Year, Chinese New Year) is the ‘golden quarter’ – a period of trading that contributes disproportionately to the total yearly revenue of many retailers. As new restrictions and possible winter lockdowns threaten high-street sales, how can businesses avoid losing out again in the online marketplace?
Our ‘Holiday Horror’ whitepaper sets out the findings from the research, conducted during late August by YouGov for 7bridges.
Among the most eye-catching stats revealed is the large number of businesses that ran out of stock or were unable to fulfil orders during the early months of the pandemic. If similar figures occur during the ‘golden quarter’, the effect on the annual revenue will be even worse.
Over 25% of retailers were unable to fulfil sales because of logistics carrier failures in the first wave of the pandemic
While carrier failures contributed strongly to the difficulties in fulfilling online sales, the data also points to the vulnerability of many businesses with a centralised stock-holding model.
Warehouses were affected by lockdowns and staff sickness in the first half of the year, and a significant proportion of businesses say they would not be able to operate if their primary warehouse had to close during a ‘second wave’. An inflexible supply chain and over-reliance on a few carriers leaves a business particularly exposed in the current conditions.
Clawing back lost high-street sales through online is one thing. Making a profit out of online sales is another. As Kyle Monk of the British Retail Consortium says, the profit model for store sales does not automatically translate to online, so just ‘moving stuff online can mean a hammering for profitability.’
One of the factors that made it difficult to maintain margins for online sales during the early months of 2020 was the sharp increase in surcharges levied by the carriers.
For most businesses, by the time they received the carrier invoice it was too late to do anything about those lost margins. And most are still in the same position as they face the cold winds of the next few months.
The research shows just how much more shoppers spend when they are online and not in the high-street. It’s a huge increment. These are customers worth looking after; the quality of their online experience influences their shopping choices, and yet many businesses are falling way below standards set by the dominant platforms.
And it matters: consumers have been conditioned to these standards, and in the survey they express a strong tendency to avoid buying online from brands that haven’t got their logistics sorted.
Online shoppers across the UK would spend 225% more with less-favoured brands if they provided a high-quality delivery and returns service
Whatever brand equity a business has built up through its in-store and multichannel operations, there’s a real threat now that consumers will see things differently if online shopping is the main point of contact. The data indicates that perceived failings in the delivery/returns offering will be judged without sentimentality – and the dominant platforms are poised to benefit from that.
Not all businesses are just hoping for the best. Some are taking decisive steps to protect against the worst hazards of the situation by reducing risk and turning the threat into an opportunity. In the white paper, we set out simple measures any business can implement now, and we show how a global brand took swift action at the beginning of this year to survive and compete. With the aid of 7bridges, it re-modelled its logistics to minimise exposure to pandemic disruption, build resilience, and move swiftly to a highly-distributed, ship-from-store operation. This was achieved within three months, and it demonstrates that – at least in business – the tools to fight the pandemic are already here.
For detailed insight into: what businesses face in the coming quarter; what consumers expect from online shopping; the impact of the pandemic on logistics and sales; and measures businesses can take to survive and compete, download the full whitepaper here.