It is safe to conclude that all enterprises and society members are experiencing the effects of Europe’s ongoing economic crisis. No one has been able to escape the previous year undamaged, whether it be from dealing with a future of increasing uncertainty or high levels of inflation that are affecting daily prices.
However, one sector that has received a particularly hard blow during these tumultuous economic times is the retail sector.
First off, the Covid-19 pandemic caused a rise in e-commerce throughout Europe, with sales increasing by a whopping 20% in 2020 and another 13% in 2021, according to Statista (Ecommerce Europe).
As a result, the retail sector was forced to scramble to keep up with exponential increases in demand, which put a lot of strain on worldwide logistics. Retailers and manufacturers were thus left in a difficult situation when supply chain problems resulting from pandemic restrictions, manufacturing delays, port congestion, natural disasters, and more arose.
shift in consumer spending
Consumer spending habits quickly shifted to the travel and leisure sectors as a result of the easing of pandemic restrictions and the opening up of the world.
And now that we’re dealing with historically high inflation (10.9% in September 2022, according to Statista), customers are once again altering their behaviour by spending money on discretionary, more important goods rather than non-discretionary items like furniture and household appliances.
For instance, the online high-end furniture store Made.com saw revenues of £315 million in 2020 and £110 million in the first quarter of 2021, but now the business is in danger of failing due to sharply falling demand (BBC).
To keep their disposable income as high as possible in the face of economic uncertainty, consumers are continuing to spend on items like clothing but are moving to less expensive brands.
According to Reuters, the online clothes store Boohoo reported a staggering 58% decline in core earnings in the first half of 2022. Due to declining consumer demand, a sharp rise in product returns, and longer delivery periods for goods sold to international markets, revenue was also down 10%.
Demand is outpacing supply throughout all of Europe.
Sadly, supply has not increased to match this decline in demand. As a result, it is now clearly visible throughout Europe and the rest of the world that stores are holding too many stale consumer products. According to Market Scale, some retailers have up to a 30% overstock problem, forcing them to lower prices or add more inventory to liquidators in order to keep the seasonal product cycle running.
In terms of logistics, this implies that warehouses are overflowing with inventory and that European terminals are stockpiling containers full of retail items, which might lead to significant Detention and Demurrage penalties and further disrupt supply chains for businesses. Simply said, a lot of retail businesses are currently experiencing inventory traffic jams. So where does a provider of logistics services fit in? From a supply chain standpoint, it might be challenging to stop overstocking problems and find quick fixes, but there are steps businesses can do to lessen the impact.
Containers at ports that are accruing D&D charges may be moved to yards to make them more cost-effective, or they may even be emptied at off-dock sites to provide businesses a better understanding of the commodities and potential next steps. Additionally, returning equipment could lower costs and support the continuity of the global supply chain.
The best options are adaptable ones.
Inventory management relies heavily on resilience and agility, thus supply chain management solutions that let you speed up or slow down your logistics operations are crucial for getting the appropriate volumes of stock to the appropriate locations at the appropriate times.
Maersk’s Flex Hub is one such solution that enables you to regulate your cargo flow in accordance with demand patterns and has been widely used by businesses in 2022 during such significant changes in customer demand.
Businesses can choose the best time to ship an order by storing freight at hubs near important markets or even at the point of origin. As a result, order-to-delivery lead times can be cut by up to 70%, and you can prioritise freight
This makes it a very viable option for the present retail market conditions, especially when combined with the ability to see goods in hubs in real-time and a possible cost reduction of 30% compared to traditional storage.
Going into 2023, the situation is still incredibly unpredictable, therefore the most robust course of action is to prepare supply chains for every conceivable scenario. However, it is anticipated that market turbulence would persist
When it comes to controlling inventory in retail, accuracy is of utmost importance because small errors brought on by variations in shipments, lost merchandise, returns, and a host of other causes can result in overstocking problems.
The world of retail stock management will be shaped around data and completely connected to an integrated supply chain as we move more and more into a digital future.
Solutions will provide full visibility end-to-end to assess inventory levels in containers, warehouses, and the final destination in addition to transit and storage visibility.
Maersk is already integrating visibility-focused solutions for customers into its integrated logistics operations, providing businesses with the resources they need to prevent future inventory crises and successfully manage market swings.