Retail sourcing set to shift post Brexit

Brexit could see a big shift in sourcing away from the EU to the Far East as UK retailer adjust their supply chains, according to a survey by Barclays.

It found that retailers are looking to build more efficient supply chains (76 per cent), and are considering changing suppliers (30 per cent) and sourcing from different countries (28 per cent).

More than half (52 per cent) expect to increase supply chain activity in India and 43 per cent in China.

Continental Europe would be the big loser, with 43 per cent of respondents anticipating a reduction in what they source from the region.

Some 38 per cent would source more from Africa while 32 per cent would source more from the UK.

However, four out of five retailers are concerned about the impact on the value of the pound and 70 per cent said they would be reviewing their currency hedging strategy in light of the referendum result.

Ian Gilmartin, head of retail & wholesale at Barclays, said: “Getting your supply chain strategy right can be the key to success for retailers. It’s a mixed picture, but there are some encouraging findings in our post-Brexit survey. Retailers are not overly pessimistic about the impact of the vote on their supply chains, and yet they are still thinking carefully about what they need to do now, in particular with regards to which regions they source from and their foreign exchange strategy.”

Just over half (52 per cent) think that their business is unprepared for Brexit, but a small majority (56 per cent) think that Brexit will have no real impact (41 per cent) or a positive impact (15 per cent) on their supply chain.

Most retailers (59 per cent) expect supply chain costs to remain the same or just increase slightly. Almost a third of retailers (31 per cent) expect cost changes to result in price increases for customers.

Gilmartin said: “It’s reassuring to note that most retailers don’t intend to pass on costs to their customers and will instead look for other ways to tackle supply chain issues. The really significant news is that a third of retailers surveyed intend to increase domestic supply chain activity. At a time when we’ve all got to pull together to encourage growth in the UK this is a very positive sign, and at Barclays, we’re committed to doing all we can to support our clients with their supply chain strategy and to help businesses thrive.”

A separate survey of retailers and consumers carried out before the Brexit vote found that close to two thirds of retailers (63 per cent) believe that their supply chains are not cost-effective.

The continued rise of online shopping and the associated challenges of meeting consumer expectations for faster delivery times and multiple delivery options is a key supply chain issue (78 per cent). In response, the average number of delivery options from large retailers is expected to increase from seven today to ten by 2019, with greatest customer demand being for faster delivery (59 per cent), Sunday delivery (43 per cent) and specific timeslots (37 per cent).

Likewise the unpredictable nature of consumer demand is a significant consideration for retailers’ supply chains (72 per cent). Consumers have their own concerns, 63 per cent stating that retailers increasingly seem to stock products which are unsuitable to the weather.