Here we consider the impact on the sector and how businesses can deal with the rapidly evolving situation whilst preparing for the long term consequences.
One of the most significant challenges faced by food retailers is the management of fluctuating demand. Mass stockpiling by consumers has led to demand at levels akin to Christmas, but without retailers having the benefit of months of preparation in advance. Supermarket sales in March were up 20.6% on the same period last year, the busiest month on record. Alongside this has come a drop in demand for discretionary purchases.
Self-isolation and social distancing policies have also changed how this increased demand is exhibited. The use of online shopping has soared, whilst traffic footfall in shops has fallen as people are encouraged to stay home.
These fluctuations demonstrate the importance of the ability to predict and manage demand, both now and in the months ahead.
Supply chain disruption
The ability to manage demand is also key when dealing with disruption to the supply chain. Whilst the short term focus is on replenishing essential items depleted by consumers, retailers should expect to see the longer term effects of COVID-19 on the supply chain in the coming months. In particular, quarantine restrictions and labour shortages affecting elements of the supply chain may cause delays or unavailability of goods.
How can retailers respond to current issues and prepare for the long term consequences?
Evaluate your supply chain
Consider the potential disruption to your business by closely evaluating and monitoring your supply chain. This involves understanding the critical elements of the chain, the logistics route and key suppliers and customers. What steps can be taken to minimise disruption? If risks are identified, are there contingency supply options available?
Understand your contracts
Keep your contractual arrangements under review and understand your contractual obligations. Do any of these agreements need to be renegotiated as a result of the disruption? Further advice on commercial contracts can be found here: https://www.ts-p.co.uk/news/covid-19-understanding-how-coronavirus-can-impact-commercial-contracts
Adapt your business practices and assess any long term shifts in consumer behaviour. COVID-19 is acting as a catalyst for the adoption of technology and as customers head online for supplies many food retailers will find it essential to have an online presence. In addition, increased demand for local produce could provide retailers with an opportunity to take an advantage of any local connections.
Keep dialogue open with staff, suppliers and customers in order to retain an operational workforce and maintain consumer confidence.
Keep your cash flow under analysis and ensure that access to cash remains available in the long term. If required, open dialogue with lenders in respect of your financial facilities. Our guidance on the measures introduced to help support businesses can be found here: https://www.ts-p.co.uk/news/covid-19-guidance-on-business-support