Retailers stock up to secure their future
Some retailers are stocking up to ensure their businesses are more resilient in any further Covid-19 disruptions.
Real estate agent CBRE said this is driving interest in warehouse and logistics properties, and estimates some retailers were increasing inventory by up to 10 per cent to avoid being caught short.
Retail specialist Chris Wilkinson of First Retail Group said some retailers were holding more stock because they had been able to buy from distressed supply chains in other parts of the world.
‘‘In other cases, we’ve got some real challenges with supply chains where manufacturing and distribution companies have folded and through Covid there hasn’t been the manufacturing done.’’
Some large retailers were increasing their online distribution capability.
‘‘They’ve had such a seismic shift to online that they are looking at putting more main centre type distribution hubs in, just like we’ve seen in Wellington, where Courier Post are putting in a big new distribution centre.’’
Some retailers were considering developing ‘‘local fulfilment hubs’’ where products were distributed locally.
And supermarkets were establishing ‘‘dark stores’’ dedicated to online retailing.
‘‘There’s a likelihood we will see more dark stores happen,’’ Wilkinson said. Retailers were looking at large distribution sites for that.
‘‘Everyone is thinking about resilience right now. It doesn’t take much to lose goodwill,’’ Wilkinson said.
Big retail companies’ shareholders wanted to see strategies that would make the companies they had invested in more resilient.
Head of CBRE’s Supply Chain Advisory across the Pacific region Christine Miller said Auckland was probably seeing the most increase in demand for industrial property in response to retailers increasing inventory.
E-commerce operations took three times more space than just storage because there was space needed for picking up, package, dispatching and staging processes.
‘‘Businesses are now increasing their inventory ‘safety stock’ so they are starting to hold more inventory.
‘‘This will ensure that when the disruption occurs they are not caught unprepared,’’ Miller said.
This was very different from ‘‘just in time inventory’’ previously, where businesses were careful not to have too much money wrapped up in stock and that stock did not spend much time in a warehouse.
‘‘In the current environment where we’ve seen the degree of disruption, it is actually becoming far more tolerable to have higher levels of inventory.
‘‘And we’re seeing indications that that could be upwards of as much as 10 per cent of additional inventory.’’
If a warehouse was operating efficiently it would not normally have space for that much extra cargo.
‘‘We’re seeing businesses indicate that they are going to hold product for up to 12 months to avoid pushing it into the clearance channels,’’ Miller said.
‘‘I’m certainly aware of some businesses that have ordered more stock than they would normally because they are a bit worried about risks to supply chains,’’ Retail New Zealand chief executive Greg Harford said.
‘‘But I’m not aware that’s necessarily terribly widespread.
‘‘I don’t think we are going to see a huge upswing in rehousing needed by retailers, particularly over the next little while,’’ Harford said.
‘‘We are seeing a trend to online sales and that will drive ultimately more logistics arrangements out of warehousing but I think it’s a long way before that necessarily happens.
‘‘It’s going to take time for the market to adjust to the new reality, I think.
‘‘We’re only two to three months into the new world so it could be some months before we have a really good sense of how things are going to settle down,’’ Harford said.
‘‘Everyone is thinking about resilience right now. It doesn’t take much to lose goodwill.’’