Challenging times for retail supply chains

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The UK’s retail supply chains face major upheavals over the next five years with more than 60,000 shops closing down in the face of continuing austerity and the rise of internet shopping, a study by the Centre for Retail Research suggests.

Online retail is forecast to rise from 12.7 per cent of the market in 2012 to 21.5 per cent by 2018, while retail operating costs have been rising faster than consumer spending.

As a result total store numbers will fall by 22 per cent from 281,930 today to 220,000 in 2018. And, over that period, 164 major or medium sized companies will go into administration involving the loss of 22,600 stores.

Retailers with a strong web offering now need only 70 high street stores to create a national presence compared with 250 in the mid-2000s, the study, entitled Retail Futures 2018, found.

And it predicted that Wales, the North and the Midlands would see a much higher level of closures.

Clearly, this is going to have a significant impact on retail distribution networks with significantly lower densities pushing up the cost per delivery.

At the same time, there is the need to  make the high street offering more attractive to compete against the growing proportion of online sales.

The bigger retailers are already restructuring their networks to meet the demands of the high street and online.

But smaller retailers are going to find it even harder to compete in the coming years and will need to look hard at their supply chain strategies to achieve the maximum efficiency.

Could this be the moment to look again at collaboration to give smaller retailers the economies of scale they need to compete both on the high street and on the internet.

There have been trials of City Logistics schemes in the past but these have been more about solving an environmental problem in urban areas. Perhaps its time to think about solving the business problem of competing in the retail environment of 2018.

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