A shortage of HGV drivers, increased Brexit red tape, not enough warehouse staff, high freight costs and a shortage of food-grade CO2. It feels that, from week to week, the supply chain issues facing UK retail have only piled up further, posing big questions for the industry.
- While the media and government is focused on how the food supply chain is holding up, fashion and general merchandise retailers are struggling too
- Boohoo is in the process of automating its warehouses to get around a burgeoning labour shortage
- H&M has promised to shield consumers from inflation, but the pressures will extend beyond this Christmas
The white-goods etailer said its UK sales in the six months to September 30 had been hampered by “the nationwide shortage of delivery drivers and ongoing disruption in the global supply chain”.
Much of the focus – both from the media and politicians – has been on how these issues are affecting food availability heading towards the end of the year. Only last Friday, the British Retail Consortium (BRC) warned the government that there were just “10 days to save Christmas” for the retail industry.
Yet it is not just food retailers that are struggling. Fashion and general merchandise retailers, too, are battling into fierce global headwinds – from inflated global sea and air freight prices through to rolling coronavirus restrictions in manufacturing hotspots such as Vietnam and China and a lack of warehouse workers at home.
Next boss Lord Wolfson this week outlined how the latter issue was causing him the worst headaches at the moment.
Seasonal workers – often from overseas – have traditionally been required during the Christmas golden quarter, but this year he expects “there are likely to be some pressure points in December”.
“The answer lies in an immigration policy that makes the best use of the contribution that people from overseas can make to our economy where they’re most needed”
Lord Wolfson, Next
While the government has recently, and begrudgingly, relaxed its stringent visa rules to try to entice more overseas HGV drivers to come to the UK for three months to ease grocery’s issues, Wolfson says more needs to be done to support warehouses.
He said: “The big issue is availability, and particularly availability for seasonal staff. The answer, we think, particularly for seasonal work, lies in an immigration policy that makes the best use of the contribution that people from overseas can make to our economy where they’re most needed.”
A shortage of warehouse workers is also an issue for Boohoo. Boohoo chief executive John Lyttle said: “We are seeing demand on labour increasing and lower amounts of labour available than in previous years.”
Co-founder Carol Kane said the pureplay giant has been looking at automating more warehouses to address this issue longer-term, but admits that will not have happened ahead of peak.
“Our warehouse in Burnley is already fully automated and we’re going through that process in our Sheffield warehouse at the moment. But that won’t come in time for peak,” says Kane.
“In terms of a labour shortage? I don’t think we’re quite there yet, but we will be facing that issue in the coming months. It’s a challenge, but we’ve got plans in place.”
Kane says Boohoo aims to hire more seasonal warehouse workers than it has previously, but “training these workers tends to take around four weeks, so that process is beginning now”.
Toy specialist The Entertainer’s Gary Grant says a lack of temporary warehouse workers ahead of the festive period is also “a great concern”.
However, now that the government furlough scheme has come to an end, “if people do lose one job, at the moment the opportunities are vast”.
Kane says that international freight prices “are beginning to normalise”. She observes: “It’s a short-term headwind, although quite how long short-term is remains to be seen.”
She says that, in order to insulate customers from any related price inflation in the run-up to Christmas, Boohoo has “chartered a cargo team” in order to “move freight ourselves”.
“Things are going in the right direction,” says chief executive Helen Helmersson. “But it will stay with us for a bit and definitely linked to the next quarter. Together we have things pretty much under control.”
On the ongoing issues, Helmersson was quick to point out that it was a “situation of the industry”, but insists that H&M will “not be the first one” to bow to inflationary pressures and raise prices for customers.
Boohoo’s Kane also insists her business will not pass on increased costs to consumers.
“We have to remain competitive and we’ve always been great value,” she says. “It’s really important that we price competitively to where we are because we can’t take a short-term win for long-term damage to our brand.”
It’s not just labour and international freight costs that are undermining the supply chain. In its third-quarter results last week, global sportswear giant Nike flagged the effect Covid-19 restrictions were having on the production and export of products from Vietnam.
Quiz chief commercial officer Sheraz Ramzan agrees, also flagging issues in China that are putting pressure on fashion retailer production lines.
“The government has introduced emergency measures to reduce power consumption,” he says.
“Some factories have been told they’re only allowed to operate for a certain number of days a week and other days they’ve got to be shut off so they’re not consuming any energy, so that’s happening and to various degrees, because different provinces in China produce different materials.
“Then you’ve also got various Covid-19 regulations in place in China with regards to ships and vessels – things like staff and crews and how they are allowed to operate, when they can leave China and the ability to load products on the ships in a timely manner.”
“Last Christmas was severely affected by Covid, the previous Christmas was affected by leaving the EU and having a general election. Can we just have an honest and fair run at Christmas?”
Gary Grant, The Entertainer
With challenged supply chains and a shortage of warehouse staff adding to the rest of the UK’s woes, some retailers are facing up to the prospect of another tough Christmas.
The Entertainer’s Grant sums up the industry’s frustration. “Last year and last Christmas were severely affected by Covid, the previous Christmas, 2019, was affected by leaving the EU and having a general election in December.
“Can we just have an honest and fair run at Christmas? We need to have a good Christmas as retailers.”
Although understandable, it seems unlikely that Grant’s Christmas wish will come true. While retailers may be working overtime to solve their supply chain problems, they will simply have to learn to live with them in the short term.
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