The Brexit fallout has affected very few industries as severely as retail. The UK conducts almost half of its foreign trade with the EU countries, and the possibility of border checks and custom delays have convinced many retailers to stock up on necessary supplies for the times ahead.
We previously covered how the warehousing industry has managed the high demand for storage space. Brexit has been ratified officially, so let’s consider what the future holds for the UK retail and warehousing sector.
The Transition Period
While the UK has left the EU via what has now become an irrevocable process, both sides have agreed to an 11-month transition period. During this time, both sides will decide on a future relationship, and the model of trade agreements will be decided.
The UK is already looking to get new suppliers for markets that can supply UK customers with high-quality, low-priced products. UK exporters are also looking for retail businesses around the world that would be happy to market our products.
UK importers and exporters will need to rely on external, short-term storage facilities that can store and move products to destinations when required.
Costs of Imports Are Expected to Rise
Commercial data from the market suggests that the UK lacks enough buildings to store goods and products received from or supplied to other countries. Previously, goods purchased from the EU had to be stored only for a short time within the UK.
For example, it was possible to buy and ship fruits from Barcelona at 6:00 AM in the morning and display them on shelves by 10:00 PM the same day.
However, due to Brexit, it would be difficult to achieve such a speedy movement of goods, and we might see some bottlenecks at important port cities. The delivery of perishable goods will take at least 24 to 48 hours. This poses a new challenge for businesses, and their decision makers-and strategists will need to predict demand better.
Retailers may need to order more products in a single shipment, especially if the order is booked from a distant location like Thailand compared to ordering from France or Poland. The greater distance will mean higher freight charges, which will increase costs for retailers and consumers.
Managing Logistics Will Become a Headache
2019 was a nightmare year for logistics managers in retail businesses. The on-again, off-again nature of Brexit negotiations meant that retailers could not be sure about what deal we would get, if any. It had been much easier to outsource product storage and delivery to on-demand warehouses as long term-planning was not feasible.
Although we now know that the UK is out for good, the exact nature of the trade deal between the UK and the EU still needs to be negotiated. It appears very likely that there will be customs checks for goods coming into the UK, and retailers will need to improve operational efficiency to sell fresh or short life products to final consumers.
For example, the pharmaceutical sector will face severe negative consequences of Brexit. Drugs and medical equipment come with expiry dates and must be stocked efficiently. Ordering from distant locations will mean there is a great chance of expiry, and pharmacy retailers will need to bear extra costs for accurate storage and delivery.
This is where on-demand warehouses have been helpful in the past, and we expect the trend to continue in the future as well.