Bella Brodie reports on the impact of the pandemic on our sector, explaining why it’s a complicated picture…
While the increased demand for UK staycations has had a positive effect on the marketplace, it’s not without a few issues behind the scenes. Manufacturers are flat out trying to get units through their production facilities, while simultaneously juggling a disrupted supply chain, material pricing, staffing, Covid-19 secure protocols, and Brexit.
New manufacturers are popping up at a rate never seen before, with innovation being the name of the game for manufacturers and parks looking for their offering to stand out in the crowd in the holiday home and short-stay accommodation markets.
But we are undoubtedly in unprecedented times, still, and pricing is also a hot topic behind the scenes. In the supply chain, there have been some unpredictably steep rises for manufacturers to cope with. While many may think they may be making hay while the sun shines, at the manufacturing end the very opposite may well be the case, as the rises are not only potentially eating into their profit margins, but if they don’t manage them well, they risk taking them into a significant trading deficit.
A LONG-TERM VIEW
To ensure as many suppliers survive to retain as competitive a marketplace in the future once things eventually return to some semblance of normality, it’s at the manufacturing point that prices are hitting and tension is appearing.
Of course, parks have hardly had it easy either, bearing a long shutdown and uncertainty and, in the past few weeks, so busy that their feet are probably hardly touching the ground.
They’ve gone from one extreme to the other, and from a management perspective, like the manufacturers, they’ve had to turn somersaults to adapt. This is all a reflection of what’s going on in other sectors of course, but we felt it right to report that while some may think the industry is now thriving, it is; but at a cost.
The price increases have to be borne somewhere, and the most obvious place may well be seen as at the point where most potential benefit can be recouped to offset it – with the end user.
PART OF A GLOBAL TREND
Let’s use a weekly shopping comparison. This time two years ago, for a weekly grocery shop of £100, you would know to expect most of the items in your shop to be available at a price you’re used to or within pennies of that price, to be available for delivery on time, or a substitute provided at a similar cost. You would know that that might feed the family for, say five days, and it would all arrive ready for you to use as you need to use it.
Since then, many items may have been subject to shortages and price hikes, and the supermarkets may simply have to pass the cost of their supply to you on, so the same shop might cost much more, for many reasons. The supermarket may even have had a huge scrabble to get the flour, or fresh produce in due to panic buying, issues with staffing harvests, lifestyle behavioural changes, Brexit and transport issues, lack of drivers and increased fuel and staffing costs. They may then be working flat out behind the scenes trying to deliver that seamlessly to you at the lowest price possible.
Exceptions may be if they have huge stocks to cater for a massive run on demand, if they’ve found a cheaper short-term supply which might not be sustainable, abandoning their previous suppliers who may then go to the wall, or if the supermarket has the reserves and structural flexibility to take a philanthropic approach and make a loss on a grand scale to help feed the nation.
The long-term implications of either of the latter options are not great.
Whether they choose to make a profit or loss on that may not be optional either, they have employees, suppliers, shareholders and other stakeholders to think of, and that’s a lot to juggle.
At the end of the day, businesses can tighten their belts and choose to reduce their profit margins as much as possible to keep the supply chain going, but absorbing increased costs that might exceed their profit margins is not a sustainable option.
A BALANCING ACT
Let’s take this comparison back to the park and leisure home industry and apply the same principles there. Manufacturers could shop around suppliers to help close the gaps in the very short term, but then they may lose the continuity of supply to fulfil orders and quality may well be compromised. If they started cutting corners on the quality of components, the after-sales issues on parks could be horrendous.
The same goes for staff – many manufacturers are reporting staff shortages and that has the potential to turn into a bidding war to keep production up to pace, with signs of that already appearing.
Finding a sustainable route to ensuring safe supply to parks may well mean that every stage of the supply chain has to make a compromise, and that seems to be what’s happening, with all parties sharpening their pencils where they can but also having to think about their own short, medium and long term survival.
The caring, sharing humanitarian world we saw at the start of the pandemic was a tonic in terms of showing all the best of human nature, but it’s now important that as the pinch points start to emerge further down the line, that we all show a little understanding that prices have risen and that is what it is. This is the new reality we surely have to accept and adapt to.
The perception that someone somewhere is being opportunistic could easily be seriously misplaced.
It’s happening everywhere. Even the energy supplier Ofgem has recently raised their price cap for default domestic energy deals due to the record increase in the price of supply, with leading suppliers EDF saying the ‘unprecedented rate at which wholesale prices were rising meant that customers would, at some point see the impact of this global trend’. While this has impacted many, it’s been met with more of a sigh of resignation and acceptance than it would perhaps have been in previous times.
Read the full report in the November 2021 issue of Park Home & Holiday Caravan