Published on June 23, 2020 by lauraduckett

What’s been happening in the commercial world since last week? Read on to find out!

UK Factory Output Falls Drastically

Britain’s three-month lockdown has led to its factory output falling at its fastest pace on record. A survey of 360 companies revealed 74% had produced less in the latest quarter compared with the first quarter of 2020. Only 17% of firms had produced more. This data goes against predictions that online spending would feed into a sustained demand for manufactured goods.

Industries with the steepest decline include motor vehicles and transport equipment, understandable given the mass shutdown of production at many manufacturing plants across the UK. Perhaps more interesting is the fallen output of books, which was not anticipated. Only 13% of those surveyed said book orders were normal for the second quarter of 2020; 71% reported less. The Confederation of British Industry (CBI) also reported that export order books were at their lowest level on record.

Talking point: Does the huge drop in manufacturing reflect the cautiousness of the British consumer? What other manufactured goods will have dropped so significantly during the lockdown?

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E-commerce Boom for L’Oréal Thanks to Makeup AI

This week, L’Oréal, the world’s largest beauty and cosmetics group announced its first-quarter e-commerce sales, which had grown by 53% compared with the same time last year. Analysts predict that the company’s new marketing tools such as virtual makeup and hair-colour simulations have aided sales. Furthermore, during the lockdown, customers have been able to book one-on-one virtual beauty consultations.

The long-term augmented reality collaboration between L’Oréal and its artificial intelligence entity ModiFace reflects a growing market. Competitors Maybelline, Yves Saint Laurent and Urban Decay are just some of the many cosmetics brands that have also turned to ModiFace to enhance the consumer experience.

Talking point: What privacy issues are relevant here? Are there any other drawbacks of using artificial intelligence such as ModiFace for cosmetics brands?

DPD Hiring Spree

During the lockdown, the UK saw its ‘biggest boom in online retailing’ with a huge surge in demand for goods bought online. In response, delivery company DPD has embarked on a mass hiring of 3,500 drivers and 2,500 support staff. The international parcel delivery service has also committed to an investment of £200m in vehicles, regional depots and handheld devices. It is estimated that parcel deliveries have shot up by 40% since mid-March.

Although the re-opening of the high-street is likely to cause a fall in demand for online shopping, management consultants at McKinsey have predicted that 2020 will see a 20% increase from its rate in 2019.

However, the future of online delivery remains contentious. Delivering parcels to each house is expensive because it takes time. La Poste Group (which owns DPD) and is the second-largest express parcel delivery firm in Europe after DHL, believes it would be more cost-effective to deliver to lockers only for small parcels.

Talking point: Do you think that parcel deliveries to lockers is the future of e-commerce?

Tesco Sell Polish Operations

This week, Tesco announced it was selling its 301 stores and offices in Poland to the Danish retailing Salling Group for £181m. This will affect over 7,000 employees but the move is unsurprising given Tesco Polska’s operating loss of £24m in 2019. Furthermore, it follows Tesco’s decade-long consolidation of its assets. The move comes only months after the British retailer retreated from its Thailand and Malaysia operations, where stores were sold for £8bn. Tesco has sold its operations in other markets including Japan, South Korea (for £1.1bn in 2015), the US (for £80m in 2013) and Turkey (for £30m in 2016).

This has allowed Tesco to refine its operations in European markets where it holds a stronger position such as in the UK, Czech Republic, Hungary and Slovakia. In the UK, despite initial uncertainty, Tesco has retained its strong position and over the lockdown period, sales have jumped 11.7% compared with the same last year. This increase is larger than those seen by Sainsbury’s and Aldi.

Words: Holly Porter

Missed last week’s update? Read it here!

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