Covid, Brexit and stock availability damaging profitability in retail businesses, research shows

A new survey commissioned by OGL Group reveals that Covid, Brexit and supply chain issues are the greatest factors affecting profitability for retail wholesale and distribution businesses in 2022.

The research focused on those companies that distribute retail including equipment, packaging, appliances, display units and more.

The retail industry is an integral part of the UK’s economy, comprising of 5.2% of gross domestic product (GDP) in 2020 and 9.3% of all UK employees in 2019. In 2019 alone, retail sales in the UK were worth £439 billion.

Both the Covid pandemic and Brexit have hit supply chains hard and necessitated even the most traditional retailers pivoting to online sales. Exacerbated by stock management pressures, firms are citing top technology priorities for the next 12 – 24 months as website creation and updates 40%, linking ERP with eCommerce 36% and business performance reporting 32%.

The five main factors affecting wholesalers companies’ profitability in 2022 were cited as the Covid 19 pandemic 53%, Brexit 49%, stock availability 45%, inaccurate data and errors 30%, and manual processes 23%.

Digging deeper into coronavirus and its effects, respondents’ business priorities were to improve sales strategy and route to market 85%, a crisis plan in place 81% and effectively manage cashflow 81%.

Back in 2019, when OGL conducted the same survey, respondents from catering businesses cited employee costs 73% as the main factor affecting profitability, followed by inaccurate data 47%, and manual processes and outdated technology – both 40%. Manual processes are still a top five factor, but unsurprisingly Covid is now the top factor affecting retail businesses this year. Employee cost and outdated technology have been ousted by the pandemic and stock availability.

The pandemic has led to supply chain shortages resulting in some retail, catering and leisure businesses stockpiling products and parts to ensure supply to clients. Manual processes are still plaguing businesses, with 66% citing them as a problem that can slow down their business efficiency, and inability to correctly assess performance and sales.

Entering another potentially uncertain economic period with continuing supply-chain issues, the Ukraine-Russia war, cost of living and fuel price rises, retail, catering and leisure efforts to increase profitability are critical. Technology is at the heart of this. 87% of respondents agreed that technology is vital to the efficient running of their business, an increase on 67% three years ago, while 79% agreed that automating business processes helps their companies stay competitive, up from 53% pre-pandemic.

NVC Lighting Ltd supplies to retail businesses and Jason Huang, Assistant CEO, explained the benefits of automating processes by integrating disparate systems included the ability to “track the whole processing of all kinds of orders, including sales, purchase and works orders. Additionally, all reports of operations can be exported quickly and accurately.”

A key finding of the research was the wide spread of technologies used and the disparate nature of systems that are not necessarily “talking to each other” to provide a full view of operations. In the retail, catering and leisure sector more than 95% of respondents use one or more software systems to run their business.

Respondents see benefits from integrating disparate systems; 40% listing the main reason to use a single system as reduced administration time, followed by 40% citing integration with third party software and 36% wanting to future proof their business using the latest technologies.

Survey respondents confirmed that eCommerce has grown exponentially, with 87% stating that being able to sell products online easily is really important to them. Additionally, 85% of respondents stated that using an eCommerce platform was an effective tool for managing business operations. This comes as little surprise as businesses shifted online en masse to ensure continued supply.

Critically ERP systems are a key technology with 70% agreeing that they give greater availability and control of stock. ERP refers to a suite of integrated software that businesses use to manage day-to-day business activities, such as sales order management, stock control, warehouse management, CRM and more.

The main barriers to deploying an integrated software solution were cost, with 47% citing it as a factor, down from 67% in 2019, followed by 34% with business disruption, finding a solution right for their business 30% and 26% with data security. Cost is often associated with the misconception that ERP systems are only for larger businesses, and the lack of information about affordable subscription-based models.

Gary Reynolds – operations director across OGL Group, a technology provider with a strong client base in the retail, catering and leisure sector, commented: “This year’s findings reflect the huge impact the pandemic has had across any business that holds stock, while supply chain uncertainties were exacerbated by Brexit, impacting companies’ profitability. Many businesses across the sector are having to take a pragmatic approach to supply customers – positively though there is a greater degree of acceptance of cloud technology and understanding that ERP systems are not just for larger companies.

“At OGL Group, we have seen our retail, catering and leisure clients evolve since 2019, when we last conducted the same survey. Many have transformed their businesses at breakneck speed, but we are not out of the woods yet. Only through full visibility of all business processes, ideally via a single dashboard, will they fully understand their business, areas for improvement and a plan to meet the challenges that 2022 will bring.”

NB: survey conducted in March 2022 and any comparison is to the same questions in September 2019. Respondents were given a number of options for each question.