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Beating the Christmas Grinch for UK retailers

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Most of the products in a popular Soap and Glory gift set are made in the UK. But the elaborate tins that contain the toiletries come from China, leaving Boots with a tricky logistical challenge.

The Nottingham-based retailer needed to bring a delayed order of 80,000 tins into the UK and get them packed in time for the £32 product to launch on December 3.

It ended up shipping them to Korea and then airfreighting them to the UK. The company also hired additional “assemblers” to make up for the time lost because of transport problems in order to put this and other popular sets together.

Such challenges have been typical of one of the most unusual festive periods in recent memory. Although stores have remained open — unlike in 2020 when non-essential retail was shut for most of November — retailers have grappled with Brexit bureaucracy, global shipping disruption and shortages of warehouse workers and truck drivers.

Boots’ managing director for UK and Ireland, Sebastian James, said ensuring seasonal ranges reached stores had been “an extraordinary effort” involving chartering its own ships — something Asda and John Lewis also did — and dispatching head office staff to shops.

Another senior executive in the sector said there had “been a lot of compromises . . . everyone is struggling with next-day delivery and stock”.

But dire predictions of sold-out toys, imported turkeys and shortages of pigs in blankets have failed to materialise. “We have increased our volumes of turkeys this year versus last and they are all British,” said Asda, the UK’s third-largest supermarket. “And there are plenty of pigs in blankets.”

Grocers averted potential bottlenecks in distribution by hiring additional drivers in the autumn and sending products with longer shelf lives, such as Christmas puddings and festive drinks, to stores earlier than usual. That cleared as much delivery capacity as possible in the 10 days before Christmas for fresh produce.

Non-food retailers have focused on maintaining availability of key product lines. “We have 15 per cent more stock this year than last year,” said Alex Baldock, chief executive of electricals retailer Currys. “But we are showing customers 100 large-screen TV options instead of 120.”

Stock building for the festive trading peak began earlier than usual at many retailers. “Hindsight is a wonderful thing, but looking at our stock availability, it’s materially better than some competitors,” said Simon Arora, chief executive of variety discounter B&M.

The company asked suppliers in Asia to ship earlier, with the first Christmas stock arriving in August and September.

Members of the public walk passed a Poundland store in Nottingham, UK
The chief executive of Poundland’s owner said ‘we didn’t dilly-dally around over pricing if it meant we got goods in reasonable time’ © Oli Scarff/AFP/Getty

Andy Bond, chief executive of Poundland’s owner, Pepco, said it had sometimes been necessary to balance profit margin with availability. “We have negotiated hard, as we always do, but we didn’t dilly-dally around over pricing if it meant we got goods in reasonable time.”

Scale helps enormously. Poundland has more than 800 stores in the UK. Halfords dominates cycles. Argos is the country’s biggest toy retailer and Currys is the market leader in electricals.

“We are number one to our suppliers as well as our customers,” said Baldock.

Such luxuries do not apply to Christow, a small online retailer of home and garden products, which faced significant challenges importing artificial Christmas trees.

“The region of Vietnam where many of these trees are made was put into a severe lockdown, which pushed back production dates,” said Josh Piercy, ecommerce director of the Devon-based company. “That would have been OK if everything else had gone perfectly.”

It did not, with shipping delays and driver shortages in the UK compounding the disruption to manufacturing.

“It meant we had to be very flexible with our warehouse operations,” Piercy added. “If they could only deliver at two in the morning, or on a Saturday, then we ran an extra shift so we could take it.”

Christow also added up to four weeks on to delivery times for pre-ordered goods, a form of expectation management widely employed elsewhere. Even John Lewis, which has a well-developed online offering, extended its standard delivery time to 10 days over the Black Friday period to build in some contingency.

Shoppers helped by buying early. Total sales in the four weeks to November 27 were up 5 per cent against the same period a year earlier, according to the British Retail Consortium. Barclaycard said retail spending on payment cards rose 16 per cent in November, with toy, gift and jewellery sellers seeing particularly brisk trade.

But keeping shelves stocked has come at a price. Having already raised pay rates for HGV drivers, Amazon is now offering more than £11 per hour for warehouse workers at many locations.

Sea freight rates are considerably higher year on year and stocking up earlier has meant more cash tied up in inventory.

But there has been less discounting in many sectors. This time last year, big chains such as Debenhams and Arcadia were set to be liquidated and were slashing prices to clear stock. The BRC’s shop price index for November showed prices rising by 0.3 per cent on average, the highest rate since May 2019.

The challenges will not end on December 25. For some sectors such as furniture, Boxing Day marks the start of one of the most important periods of the year.

Companies such as Made.com and DFS have warned of lengthening delivery times for large items such as sofas. They have responded by moving production nearer to Europe and holding more stock.

For others, planning for Christmas 2022 will start towards the end of January. Piercy pointed out that raw materials prices have increased significantly since purchase agreements for the current year were struck and that these would feed through into prices next year.

Nor are the global issues around container freight likely to ease off. “We have assumed that disruption will continue for the whole of next year,” said Pepco’s Bond. “We cannot see these issues going away anytime soon.”



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