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Summary
- Meteoric rise observed in online retailing across the United Kingdom during the lockdown, improving fortunes of delivery logistic firms like DPD and Kingfisher
- Both companies are on a hiring spree to meet this sudden surge in demand, which is comparable to Christmas and Black Friday trading seasons
- This recovery is not broad based, and mainly coming from large retail chains, small and medium segments lagging behind
- Job lay-offs across the nation might pull down the demand in months to come
The months of April and May 2020 were the golden period for the sales of online retail firms. Most citizens were forced to stay at their homes due to the strict implementation of the lockdown in the UK during this period. They had nowhere else to go but to depend on online retailing companies to get provisions delivered at their doorsteps. These two months not only provided an exponential growth opportunity for online retailers but also to the logistic companies who were delivering these provisions to the households. The number of delivery logistics providers in the UK is lesser, since the industry has a high investment barrier, so these chains tended to benefit from the sudden surge in demand. Incidentally in the month of April, the government had also relaxed several of its delivery logistics rules like, allowing goods delivery at odd hours and carrying higher quantity of merchandise in a vehicle than was permitted for use before the lockdown, which has also aided the growth of this industry.
Both delivery firms DPD and Kingfisher are pumping in funds for expansion, and also hiring people to meet this heightened demand. DPD, which is set to hire nearly 6,000 people, will also be investing £200m in the firm to improve its infrastructure and increase its vehicle fleet in order to expand its delivery services. The chief executive of the company Dwain McDonald describing the growth of the online retail industry in the past two months as the biggest boom for the industry in the country’s history. Out of the total investment planned, his company is going to spend £100 million for buying new vehicles while the rest half will go towards developing 15 regional depots, which is five more than initially planned for the year 2020. The company handles parcels for Marks & Spencer, Asos as well as food deliveries for supermarket company Morrisons.
Similarly, Kingfisher also plans to hire around 3500 employees as online sales have soared by nearly 200 per cent in the country during the two months. The chief executive of the company Thierry Garnier is, however, cautions in terming this surge in online retails as a continuing trend. He said that the demand might worsen in the coming months with rising unemployment numbers seen throughout the economy. Experts, however, feel that even though demand has improved for the online segment, but it continues to lag behind the last year levels for the retail industry as a whole. The British retail consortium had last week reported that for the month of May total sales figures were down by 5.9 per cent compared to where it was last year.
Experts, however, feel that the demand conditions though currently better for the online segment , but for the retail industry as a whole, the growth figures are still nowhere close to what they were a year earlier
The anticipation of these logistics firms regarding the expected growth pattern of online retailing is not misplaced. Since the time, the lockdown has been relaxed; the traditional retail industry has been slow to respond. The strict social distancing rules still in place has ensured that retailers are forced to implement those rules on shop floors which surely slow down the business growth. Secondly, the still increasing infection rate in the country would continue to deter a lot of people from venturing out and still shop for provisions online. On the other hand, with the rising demand for non-essentials the production activity of these products will also increase, which in turn will also increase demand for business- to- business inward transportation.
The industry, however, has been facing many challenges during the past couple of months. Being one of the sectors that were allowed to fully function during the lockdown meant that they have to strictly adhere to the distancing and other hygiene rules placed by the government. For the safety of the general public and also of the employees, strict screening of staff, sanitization of workplace and distancing among employees had to be done. The transporters have also invested in protection suits for their employees so that they could safely collect merchandise from retailer warehouses and deliver them at customer residences. On the one hand, these measures have added to the hassle and costs for the transporters, on the other the soaring demand has put undue pressure on employees to work beyond their normal working hours.
The renewed impetus to the online retail sector due to the opening up of the lockdown has not made life easy for the retailers. The easing of lockdown might have increased the size of the product basked for the customers but has not decreased the safety and social distancing measures currently applicable to the transporters. The companies though will be able to cope up with it in the mid to long-term, but currently, it is hard pressing on their employees and resources.
It is being predicted that the current surge in the online retail industry will bring about a paradigm shift in the way the entire retail industry works. As more and more people adapt to the convenience of shopping from the comforts of their homes, the importance of transportation companies will only get accentuated. Online retailing makes it easier for manufacturers to directly reach out to their customers rather than via the merchandise through wholesalers and retailers.
Currently, most of the transporters are under contract with large retailing companies and majority of their business is coming from them. However, the current lockdown situation has put in place a strong momentum where more and more retailers, including small and medium, are likely to try and sell their goods online. When that situation actually becomes a reality, it will definitely be a glorious period for the transport and delivery companies across the United Kingdom.
