Supply chain meltdown will make holiday shopping messy. Here's what you need to know.
The pandemic is haunting the global supply chain and, by extension, shoppers.
Two months out from the peak holiday shopping season, consumers are encountering empty store shelves, rising prices and shipping delays that seem to stretch into oblivion. Container ships are clogging ports, awaiting cargo or unable to get past the gridlock to unload their goods. Some factories have gone dark, lacking raw materials and hands to run machines.
Shoppers are beginning to fret: A third of the more than 5,700 people recently surveyed by Oracle, which provides cloud services for such large retailers as Prada and Office Depot, worry they won't get everything on their wish lists and paying more when they do. Here's what you need to know to avoid a holiday shopping nightmare.
--Why are so many store shelves already empty?
The coronavirus pandemic has been wreaking havoc on global supply chains since it began nearly two years ago, with suppliers and retailers wading through a sea of challenges - keeping the virus out of offices and factories, navigating shutdowns and business restrictions. Then there's the steady rise of raw materials prices and skyrocketing shipping costs. The nation also is short on truck drivers and warehouse workers.
The tangle of pressures has driven inflation to a 13-year high of 5.4%, forcing many companies to pass costs along to consumers.
Problems have been compounded by a labor shortage that has intensified in recent months, as more warehouse and retail workers become part of "The Great Resignation" - a phenomenon driven by pandemic burnout and an existential reassessment of life and work. A record 4.3 million Americans quit their jobs in August, Labor Department data shows, and big box stores and local retailers alike are struggling to fill positions and store shelves.
All the while, demand is on the rise: Retail sales rose unexpectedly the past two months despite a resurgence in covid cases brought on by the delta variant, which had a dampening effect on business activity. Last month, U.S. retail sales hit $625.4 billion as consumers flocked to shops, bars and restaurants, federal data show. Gasoline sales were up 38% compared with the same period in 2020.
Holiday retail sales are projected to climb 7 to 9%, according to Deloitte's annual forecast, to as much as $1.3 trillion this year.
Marwan Forzley, chief executive of Veem, a payments platform that works with thousands of U.S. retailers, said the outlook is promising given that more people are comfortable shopping in stores and dining out amid rising vaccination rates.
"We can expect this to continue into the winter months," Forzley said in commentary emailed to The Washington Post.
--Do I really need to start shopping now?
If you have specific gifts - especially trendy ones - in mind, yes.
Mark Kapczynski, chief marketing officer of Gooten, a supply chain solutions company, said that consumers should plan to get their shopping done well ahead of the Black Friday/Cyber Monday window if they want gifts to arrive on time.
He pointed to the record backups at U.S. ports due to covid protocols and labor shortages, adding that the delay of raw materials will cascade through supply chains and create shortages across many product categories.
President Joe Biden recently called on the Port of Los Angeles, the nation's largest port, to stay open round-the-clock to ease some kinks in the supply chain. The White House even weighed tapping the National Guard to fill in the gaps across the country's sprawling network of ports, planes, ships and trucks, The Post has reported.
Recent changes at the U.S. Postal Service will lengthen delivery times. On Oct. 1, the agency implemented new "service standards," or the amount of time it says it should take for a piece of mail to get delivered, and raised prices for a variety of services.
"All of the major carriers - USPS, UPS, FedEx - are not guaranteeing any specific delivery times this year, so absolutely shop ahead as much as possible," Kapczynski told The Post in an email.
Holiday shopping season has been starting earlier and earlier since 2014, when big box stores first opened their doors for Thanksgiving Day deals, according to Marshal Cohen, chief retail industry adviser for The NPD Group.
This year, more than half of shoppers surveyed plan to start their holiday shopping before Thanksgiving Day, according to NPD's Holiday Retail Outlook.
Consumers are expected to spend $785, on average, in 2021, which is higher than either of the past two years, according to NPD. The uptick reflects how they have "settled into the current phase of pandemic life," Cohen wrote in commentary Wednesday, "and are balancing a new sense of comfort alongside remaining concerns."
Early shoppers plan to spend more money, and have already started picking up consumer electronics, clothes and gift cards, according to NPD's research. Retailers have catered their events and deals to the early birds: Amazon started hawking its "Deals for Days" promotion in early October. Lowe's is having its "Season of Savings" kickoff on Oct. 28 and wheeling out its Christmas trees and twinkly lights in November.
Anxiety about delays and scarce inventory will motivate many shoppers to "grab what they want when they see it," Cohen wrote, "instead of waiting for better deals later in the season."
--Should I budget more this year?
Probably. Costs are snowballing with each link of the supply chain and inflation is on the rise, so will be hard to avoid higher prices at checkout. Cloud giant Salesforce forecasts that U.S. retailers will face an additional $223 billion in costs this holiday season because of the current climate.
Steve Pasierb, president and chief executive of The Toy Association, said that shipping container costs have exploded 500 to 800%. For the toy industry, which get the overwhelming share of its inventory from Asia, the costs associated with ferrying goods across the ocean have become untenable for small- and medium-sized companies. Many can no longer afford to ocean transport.
While bigger companies have the clout and resources to surmount some of the supply chain struggles, they also are paying more at every step of transit, Pasierb said. Target, Walmart, Costco and other large retailers have chartered their own container ships to have more control over the fate of holiday shipping.
"We are seeing price increases at the manufacturer and retailer levels because every step in the transportation system is costing companies so much more," Pasierb said.
Still, almost half of consumers are planning on cutting their holiday spending this year, according to UPS' 2021 Holiday Shipping Experience report; half of those who plan to cut back are motivated by inflation.
--Will hot gifts be harder to come by?
The interconnected nature of the global supply chain means that most industries and products will be affected by the crisis. Electronics and automakers have been stymied by an ongoing shortage of semiconductor chips, which could mean less holiday inventory.
Popular toys, sneakers and hot electronics like gaming consoles and laptops that succeed in making it overseas will likely sell out fast.
By mid-October, Amazon tweeted that it had already sold 1 million toys from its holiday toy list, from LEGOs to LOL Surprise dolls.
"Selection and variety will be impacted with blank spots already showing up on retailer shelves," Pasierb told The Post. "Waiting too long or for traditional promotional sales could result in an inability to get the gift a child or family member has their heart set upon."
If you can't find what you want, there's always gift cards. A third of shoppers are already banking on giving more gift cards this year, according to Oracle's consumer survey. On average, retailers generated $2.6 million in digital gift card sales in 2020, a 121% increase from the previous year, according to Digital Commerce 360.
--Is it risky to do all my shopping online?
Buying online has become a way of life for many in the pandemic as widespread store closures and the risks of in-person shopping kept consumers home. Online retail sales surpassed $791 billion in 2020, according to the Commerce Department, up 32% from the year before.
Many shoppers are planning to stick with online shopping, according to the UPS report. E-commerce sales are projected to grow 11% to 15% this year, with holiday sales somewhere between $210 billion and $218 billion, according to Deloitte.
But buying online comes with its own set of challenges, Pasierb warns consumers.
"As consumers turn to buying online, it is vitally important they do their homework, carefully scrutinize listings, and buy only from reputable sources," Pasierb told The Post. "Unfortunately, the e-commerce space is where counterfeiters and rogue sellers are passing off cheap, noncompliant and sometimes unsafe products. If it seems like too good of a deal, it probably is."
The National Cyber Security Alliance encourages online shoppers to think before they click and to do their homework before making purchases by reading reviews and looking up vendors to make sure they have a real physical location and customer service options. It also says to keep a close eye on your bank and credit card statements to catch any potential fraud or faulty charges.
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