A vital part of the equation that retail has to solve in 2024 is getting merchandise in front of consumers from the first moment. The challenges of recent years have shown no signs of abating, notes Found.ation and Cardlink’s Retail Innovation Hub “Retail Innovation Report 2024“, part three of which follows, with geopolitical tensions forming chokepoints along critical trade routes and hinder access to materials and production.
The impact of the war in Ukraine continued to reverberate through global trade, with severe disruptions and increased challenges in the supply of raw materials. As noted in the Retail Innovation Report, the end of 2023 brought new geopolitical as well as environmental challenges to the fore in some of the world’s most vital shipping lanes.
Retail and supply chain
Clashes at the entrance to the Red Sea have resulted in lost cargo, delayed shipments and market turmoil as the pipeline for an estimated 12% of global trade is at risk.
And the challenges are not only geopolitical – the rapid deterioration of environmental conditions around the world is playing its part. On the other side of the world, unprecedented drought conditions in the Panama Canal have created traffic jams for shipping. Low water levels have forced operators to reduce the number of ships allowed to pass through the canal, leading to increased delays and costs for suppliers.
The impact on retail is far from theoretical. Even if they don’t know much about it, consumers have felt the pressure of the supply chain in 2023, right in their pocket – and this has necessitated making tough decisions about how to allocate shrinking budgets and what to prioritize.
Of consumers surveyed globally, nearly seven in ten said price increases had the most significant impact on their in-store shopping decisions, while 48% zeroed in on higher prices for household items when asked about the consistent issues they face when shopping online. Both sets also identified the major issue of not being able to find the goods they were looking for because they were out of stock or their delivery would take longer than expected.
The vicious cycle of environmental degradation
Continued environmental degradation is expected to take a huge toll on global supply chains and economies. A recent study quantified for the first time the expected economic impact of deteriorating environmental conditions on global supply chains. According to the study, supply chain disruptions due to climate change will result in projected net economic losses of between $3.75 trillion and $24.7 trillion in 2020-adjusted dollars by 2060, depending on the magnitude of carbon dioxide emissions.
Ironically, the problem is circular: the same supply chains affected by climate change are responsible for an overwhelming proportion of the emissions that contributed to the problem in the first place. A 2016 McKinsey study found that the supply chain of a typical consumer company has a far greater environmental impact than the company itself – a chain that is responsible for over 80% of greenhouse gas emissions and over 90% of global impacts. air, soil, water, biodiversity and geological resources.
As climate conditions continue to worsen, critical infrastructure will be affected. Sea level rise can affect ports that are vital hubs for shipping, creating unexpected bottlenecks. Prolonged drought can block waterways that are key trade routes.
Population displacement due to climate change can sever entire supply chain links that are not even visible right now. It is therefore existential for businesses to carefully review their supply chains, diversify them as much as possible and, ideally, start implementing environmentally friendly processes.
