Both shoppers and retailers alike should brace for a bumpy holiday shopping season to due global supply chain shortages.
All sectors will feel effects that could last until the spring or later. Not only will it be hard to snag the hot holiday toys or electronics, but staples like groceries and apparel will be scarce, as well. And on top of the actual goods, there is even a shortage of the packaging material, shipping containers, and other supplies needed to deliver items from Point A to Point B. This will translate to US retailers spending $223 billion more for holiday season goods over 2020, per Salesforce. In H2 2021, US companies will roughly triple what they spent on ocean freight alone in H2 2020.
COVID-19 first caused slow downs and an increase in online shopping. Then, shut downs at factories in China, Vietnam and Malaysia caused a catch-up game of making toys and presents, which in turn has led to a backup of container ships trying to deliver them. Furthermore, these container ships are sitting outside of US ports fully loaded because there are not enough workers to unload them. And this is on top of a labor shortage in general. Consumers are feeling the frustration as they walk into stores finding higher prices and empty shelves.
And those who order their gifts online can expect even more delays. Starting this month, instead of first-class mail taking three days to arrive anywhere in the US, it could take up to five. Even retailers who have relatively quick shipping options, like Amazon, have said they may take longer than usual. And don’t be surprised to see an increase in shipping costs from USPS, UPS and FedEx to go help support their busiest time of year.
On October 13th, the White House brokered a meeting between private companies along the supply movement chain in order to address the bottlenecks. As a result, it was announced that major goods carriers Walmart, FedEx and UPS will move to working 24 hours a day, seven days a week in order to address the global supply chain bottlenecks. Target, Samsung and Home Depot are also moving in the 24/7 direction. Additionally, the Port of Los Angeles has moved into 24/7 service. The port of Long Beach has been working 24/7 for the past month. It was agreed that “opening up night capacity through that entire chain is the fastest way and the most effective long-term way to actually turn it around,” a senior White House official said. Rail, trucking, ports and labor unions all need to be on board.
Still, some retailers are sidestepping logistics companies to combat supply chain issues. For example, Insider reported that The Home Depot contracted its own container ship, Costco Wholesale rented three container ships to import goods from Asia to North America, and Walmart is chartering smaller ships that can access smaller ports.
Retailers like H&M, Nike, Bed Bath & Beyond, Ikea, Home Depot, and Boohoo have already faced big issues in regards to their supply chain. According to an interview on Bloomberg, “Retailers are having a really hard time filling their shelves,” said Steve Azarbad, cofounder and chief investment officer of the hedge fund Maglan Capital. “I talk to a lot of suppliers, and they’re telling me ‘I just can’t fill all the orders I’m getting.'” With this in mind, it’s important for consumers to be aware that some items might be out of stock or more expensive than usual and you might have to look elsewhere. In the past three months, more than 80% of consumers bought a different brand than their usual—lower prices (65%) and out-of-stock products (51%) were their primary motivating factors, per Marketing Dive.
The best advice experts can give to avoid holiday shopping dilemmas is to not put it off. “I would recommend everyone to go ahead and buy those hard to get items now, versus waiting till the holidays,” said Craig Fuller, the founder and CEO of Freightwaves. And if you’re trying to avoid the steep shipping costs, look for retailers that have free shipping options or buy online, pickup in store options to avoid these higher costs, or try shopping in person and supporting your local businesses. You may not be able to be as picky or particular as usual, and be happy with what you can find.