Reduced consumer spending, clearing the backlog of goods in storage, bringing in new orders and reducing inventory to free up cash are the main challenges DSV customers say they face as lockdown restrictions ease.
These were the key findings that emerged from a DSV customer survey conducted in early May representing a broad spread of industries. (see figure 1), which Mungo Park shared with viewers of DSV’s first public webinar held recently;
Responding to Covid-19: retail industry challenges
Figure 1. Industry Participation
While most of the 120 customers surveyed expect recovery to take upwards of three months, nearly 40% were more optimistic and anticipate recovery inside three months – and early indications are that retail stores serving lower LSMs are already showing signs of recovery.
Nevertheless, it is early days and more severe lockdown restrictions may be re-imposed, perhaps region by region, depending on how the Covid-19 infection rate increases. Any tightening of restrictions will inevitably cause further economic distress, and early gains may be reversed.
Customers were most concerned about their consumers' reduced expenditure (see Figure 2) and a longer lasting drop in consumer demand as the full impact of job losses and company closures becomes clear.
Figure 2. Main challenges
Apart from reduced demand, many retailers face other challenges: they are overstocked and have the wrong stock (summer) in their distribution centres.
Availability of stock is going to be a factor in business recovery. Clearing shipments from storage and delivery to customers (See figure 3) is going to be important as well as the shipment and processing of new orders from international suppliers. Businesses are doing their best to turn inventory into cash. This is reflected in the retail sales we are seeing, with reductions of anything up to 50% not uncommon.
Figure 3. Biggest logistics challenges
Going forward, supply chain visibility was going to be critical to better managing crises of this nature.
In fact, more than 50% of customers said they were “very likely” to examine their supply chain risk and improve resilience in the future. (See figure 4), while nearly 70% indicated that they may be interested in working with DSV to assess supply chain risk and help develop a risk mitigation strategy (see figure 5).
Figure 4. Examine supply chain risk
Figure 5. DSV's assistance in assessing supply chain risk