Tech and Product
Covid Trends and Challenges in Europe
Jul 22, 2021
6 mins read
Policies, travel restrictions, quarantine and lockdowns worldwide and within Europe have hindered short and long-distance mobility within the supply chain. Disruptions in the international supply chains across most industries have resulted in diminished business operations and reduced returns. The level of impact and extent of rebound was found to be distinctly different for each industry sector. Within each sector, the impact of the pandemic on different businesses also depends on the size and stage within the company life cycle (start-up, scale-up, maturity), along with the ability of the company to build dynamism into its logistics to support sudden changes in consumer expectations. Additionally, there is a shift in preference to multi-point sourcing models so as to combat the unreliability of single-point sourcing. Businesses are also increasing their inventory to handle such disruptions, thus requiring them to reiterate their warehousing strategies.
The pandemic put stress on all industries, including the shipper and carrier industry within Europe. A majority of the pressure was a result of restrictions on movement and transportation within and between countries. The introduction of new legal compliance regulations with respect to safety, environment, and roadways is common with European governments. There is also added uncertainty with Brexit, which has resulted in stock piling, delays and confusion around border protocol while exiting or entering the UK for cross country deliveries.
Carriers are shifting their preference to digitizing their freights—online portals for booking, API integrations, moving to digital invoices and digital PODs etc. Carriers are investing in advanced data analytics to increase visibility throughout their supply chain as a way to predict and mitigate disruption in operations. There is also a requirement to re-examine existing networks and usual lanes which may no longer be relevant, through route and cost optimization.
Retail and Apparel Industry
The retail and apparel industry saw a substantial shift in consumer behaviour towards digitization and e-commerce. Though there was a heavy drop in retail sales, online sales hit a record high within Europe. The retail industry is likely to see an increase in DTC brands offering online channels for delivery as a way to retain and satisfy their clientele, to cope with readjustment in customer expectations. While there are cohorts of customers that have increased their spending or sustained their pre-pandemic shopping habits, they do not make up the majority. Customer trends in this sector show belt-tightening and a shift to online purchases. Flexible supply chains, lean business models, regional expertise, efficient transportation and recalibration of networks will become important differentiators of choice for consumers. This will come with a shift from brick-and-mortar stores to dark stores for supporting online shoppers.
Another emerging trend in Europe is awareness around climate change and pollution is further accelerated by the pandemic. The automotive industry saw a rise in sales for electric vehicles (electric bikes, electric vans and electric cars) for personal and commercial purposes. In Europe, electric vehicle sales increased by 135%, while overall car sales decreased by 24%.
The number of new cars registered in Europe had been the lowest in 2020-21 since World War II. The industry faced closure of many stores and layoffs.
Now that the lockdown is over, some automotive showrooms are starting to re-open. In order to recover from the automotive crisis during Covid, there is a requirement for re-organizing structures while focusing on digital channels, optimizing operations and building resilience into the supply chain.
Grocery, CPG and the Food Industry
There was a reversal in revenue percentage between the foodservice industry between the food service industry and grocery retail. This shift can be attributed to apprehensions around OOH dining for safety reasons, a decrease in customer spending on non-essentials and decreased tourism. Before Covid, 68% of the “share of stomach” from the pooled revenue of the two sectors was held by the grocery industry in Western Europe. This share has increased to over 75% in 2020 after the second wave of the pandemic. Without Covid, this rise was predicted to occur only by 2025.
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The FMCG and food industry also witnessed a sharp shift in consumption due to the rising awareness around sustainability and nutrition. The emerging popularity of the “Farm to Fork” model has significantly shortened the supply chain within this sector. The Hotel/Restaurant/Cafe (HORECA) sub-sector saw a shift to home delivery instead of OOH (Out of Home) Dining. There was a sharp increase in at-home meal and beverage delivery within the industry. A balance in consumers’ expectation of on-demand deliveries with the delivery cost is needed for such a change to be sustainable.
The most prominent trend due to Covid disruptions within Europe is the rapid development of DTC (Direct-To-Consumer) channels to combat surplus produce (especially high-value products). Whether or not this trend will be able to sustain in the long term will depend upon the development of last-mile initiatives and online platforms. Shoppers who had reduced their store visits due to fear of infection are now reverting to old trends post vaccination availability. Thus, there is an increased relevance for digitalization, automation, cost optimization and traceability within the supply chain in Europe. Additionally, there is a highly fragmented delivery ecosystem system in Europe, as companies usually rely heavily on 3PL players to cater to the gaps in their logistic abilities. This poses further challenges to efficient logistics collaboration and increased delivery visibility.
While there is an increased need for digitization to ensure a business’s adaptability and resilience within the current economic scenario, the legal regulations within the EU can pose a hindrance to its expansion. Digital upskilling must comply with the stringent environmental regulations within Europe and data security and privacy compliance laws.
The extent to which the modifications to the logistics and supply chain and consumer behaviour in the past year are sustainable is yet to be determined. For example, the enthusiasm around digital transformation and green transition remains, but the in-store purchasing behaviours have increased in Europe post lockdown after the vaccine availability. There is a small window of opportunity for companies to make changes in their operations to ensure they survive the uncertainty of trends in the post-vaccine Covid-era. The urgency for rebounding varies by industry sector and size of the company under consideration. For a successful rebound, there is a need to embrace tools that ignore traditional logistics methodologies, while enhancing freight movement, improving visibility and adaptability to sudden changes in the market.
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Covid Trends and Challenges in Europe