Running a successful retail business is not easy, fast moving, low margins and managing customer expectations. COVID-19 has added more complications to an already complicated business.
According to a recent Forbes article (Nov. 2021), there are three things that are currently keeping retailers awake at night.
1. Labour shortages; COVID-19 has exacerbated an already difficult labour market. Employees with COVID-19, self-isolating, close contacts has thrown businesses into chaos. The pandemic employment payment didn’t help, with students staying on the payment rather than work. Wages are on the rise. Employers are having to up wages and offer increased benefits to attract and retain employees. Stores in the US are having to reduce opening hours because of labour shortages.
2. Climate Change: I have spoken about climate change previously. Evaluating your buildings are their location, rising insurance costs, pressure on supply chains and pressure from stakeholders, particularly from customers seeking to buy from climate conscious retailers. There will be fundamental changes on how we do businesses, where we source product and how we account for our carbon footprint. But climate change is also causing other difficulties.
Because of severe weather patterns in Brazil, the cost of producing and supplying coffee has increased, droughts in Canada have increased the cost of pasta. Food prices and food security is at an all time high, not since 1974 and the oil crisis has the price of food been so high. Of course COVID has played a part in the rise along with an increase in fuel prices. But disturbances in climate patterns will be the single biggest factor contributing to continued food price increases.
3. Supply Chain: Transportation globally of goods is facing significant challenges. COVID, increased fuel prices and shortage of truck drivers are the main drivers. There are millions of containers with rotting foods around the globe unable to move due to COVID. The cost of sending a container from China to Europe has increased from $2,000 to over $25,000, staggering. We all saw the dramatic pictures from the UK and shortages of fuel at the pumps due a shortage of truck drivers which was a direct result of Brexit.
On the whole truck drivers are aging and in the US, it is estimated that there will be a shortage of over 100,000 drivers by 2023. This has driven up the cost of labour, with increased benefits and offers of over $15,000 on starting a job. Currently, in Ireland, there is a shortage of up to 4,000 truck drivers and with increased fuel prices and insurances costs, and drivers isolating with COVID, it has put significant pressure on the supply chain. This issue will remain with us for some time.
Along with the three issues outlined above, I would like to add 2 more issues to the list.
4. Increased Costs: All the above issues are leading to increased costs for retailers. In particular labour shortage. It’s an employees market and there is movement within the labour market. The pandemic has caused people to re-assess their work life balance and how they want to spend their time. People are re-locating to areas where property to buy and rent is cheaper. Working remotely is here to stay, at least a hybrid version and in the not too distance future, we will have a 4 day working week. Employers have had to look at their businesses and what their offering is to new and current employees.
Despite recent changes to maximum claim pay-outs, commercial insurance has continued to rise. According to a 2018 report from RGDATA the retail grocery lobby, a typical shop’s insurance policy has increased from less than €10,000 a few years ago to as much as €100,000 today. This is a significant burden for any business. Compliance for retailers is an area that is costly to implement and manage. Legal requirements around HACCP, electrical, fire and employee training are compliance areas that have to be constantly reviewed and maintained. This is costly and needs to be managed.
5. Technology: The speed of technological advances in retail is moving at a phenomenal pace. Retailers are having to consider online shopping, self-service check outs, cashier less stores, virtual and augmented reality, facial recognition and customer chat bots. There is pressure to have a robust online presence, provide fast and flexible home delivery and retain customers.
Bricks and mortar will always remain a part of our shopping experience but the way we experience our visit to the retail store will change dramatically over the coming years, especially in the clothes, electronic and home furnishing sectors.
There will be no stop to the advancements in the customer experience, only the limits of our imaginations. As well as the inevitable increase in costs to the retailer, they need to insure they are keeping up and staying competitive.
Being a retailer is not an easy path, but the retailers I know are resilient, hardworking and problem solvers and where would we be without them?