It’s time to update procedures (and go green) in the retail sector.

 

Catherine Kelly, Head of Retail at Cooper Parry, emphasizes the need for retailers to integrate sustainability into their operations as they navigate supply chain disruptions and rising costs. The UK’s retail sector has grappled with challenges over the past two years, including Brexit-related supply chain disruptions, pandemic-induced uncertainties, shifting consumer behaviors, and escalating expenses. The Office for National Statistics (ONS) reported a 1.9% decline in total retail sales volumes in 2020 compared to 2019, marking the largest annual drop on record. Despite these hurdles, a closer examination reveals that some sectors have seen sales recover. While clothing and fuel volume sales remain below pre-pandemic levels, others have experienced upturns. Sports retailers have thrived, benefiting from increased sales of sports equipment during lockdowns. The booming property market and extended periods at home have boosted sales for DIY and home improvement retailers. Additionally, the return to offices and the reopening of hospitality establishments have spurred consumer spending on fashion. With positive performance indicators for the Golden Quarter—encompassing Black Friday and Christmas—Catherine Kelly believes that many in the retail sector can cautiously embrace optimism.

However, Kelly warns against the notion of returning to business as usual, noting that footfall has decreased. According to the ONS, retail footfall in the UK was at 78% of the 2019 level for the week ending January 8, 2022. Kelly is not alone in believing that a return to pre-pandemic footfall levels may not materialize, as consulting firm Alvarez and Marsal indicates that nearly one-third of European consumers expect permanent changes in their shopping habits due to COVID-19, including a shift toward online shopping, particularly for apparel, homewares, and electricals. Kelly asserts that retailers must prioritize a frictionless shopping experience across all channels, whether online, physical, or click and collect. Eventually, in-store and online experiences will converge. In the interim, providing an excellent online experience is vital. This entails understanding the market, effective marketing, and seamless order fulfillment. Nonetheless, even major retail players often make critical errors along the customer journey that harm the overall experience. In the upcoming year, companies must redesign their processes with a focus on the new customer experience and supply chain. Accountants can play a significant role in streamlining processes and enhancing efficiency. Kelly emphasizes that customers have become less tolerant of suboptimal experiences, and companies can no longer rely on excuses related to staff absences and the pandemic. Supply chain challenges persist, and companies capitalizing on increased consumer spending are concealing bottlenecks from customers. Empty online shelves with delivery times of 4-6 months are becoming common, reflecting supply chain constraints. Kelly believes that supply chain disruptions are unlikely to significantly improve over the next 18 to 24 months, and associated costs will persist. Retailers have an opportunity to embed sustainability into their operations as they adapt to new ways of working to address supply chain disruptions and cost increases. Efforts such as reducing energy consumption and near-shoring to reduce global supply chain risks can make operations more sustainable while saving money. Accountants can play a crucial role in ensuring that sustainability becomes a central consideration in decision-making, with businesses tracking both carbon emissions and profits in a meaningful way. Kelly stresses that this approach aligns with customer expectations and is commercially sound.

Despite the challenges, Kelly views this as an exciting time for the retail sector. Accountants can offer valuable assistance to clients navigating these difficulties, especially those who can bring innovative perspectives. Collaboration will be essential in finding swift and sustainable solutions to common issues. Kelly emphasizes the importance of collective efforts rather than working in isolation. As the excitement of the Golden Quarter wanes, Kelly expresses cautious optimism for the months ahead but acknowledges the potential impact of rising energy prices, inflation, and interest rates on consumer confidence and spending. She suggests that while positive growth may be retained, the pandemic’s influence is not yet fully behind us.

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