Ongoing supply chain issues could impact the holiday shopping season
Despite some easing of backlogs at ports across the country and retailers reporting they were running low on inventory this summer, supply chain issues are set to persist as the holiday shopping season gears up earlier than ever. .
“Supply chain issues are here to stay,” said Angeli Gianchandani, professor of marketing at the University of New Haven’s Pompea College of Business.
“Everything is fragile now, our supply chain is fragile, our crops are fragile… The workforce is fragile,” she said. “Everything is colliding now. It’s the perfect storm.”
This storm includes global events like the war in Ukraine and China’s zero COVID-19 policies causing manufacturing shutdowns, as well as an actual storm.
Category 4 Hurricane Ian led to increased demand for some products needed for recovery efforts, as well as stranded or destroyed equipment and materials, straining other parts of the supply chain, said said Lisa Anderson, supply chain expert and president of LMA Consulting Group.
Also in the mix:
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Supply chains are blocked
It’s not all bad news though, consumers may be able to take advantage of offers retailers who have to move surplus products that arrived late last year.
“We have an inventory problem,” said Madhav Durbha, vice president of supply chain strategy at Coupa, an enterprise software company.
“If you need a flat-screen TV, now is a fantastic time to shop,” he said, because businesses need to get that inventory out so they don’t pay to stock it.
But other items affected by supply chain delays may instead increase their price so they don’t sell out too quickly, Durbha said.
He said it would be a bit of a “feast or famine” situation for a while as retailers learn from the challenges of the past two years, diversify their suppliers and transportation options, and better anticipate consumer demands.
More good news is that shipping backlogs in Southern California are down sharply, according to Oren Klachkin, chief U.S. economist for Economy of Oxford.
“Global data shows ports are in better shape today than they were a few months ago,” he said. “A lot of companies are still struggling, but the worst supply chain challenges are behind us.”
How will supply chain issues affect holiday shopping?
The holiday shopping season, which used to start with Black Friday, now starts much earlier as many retailers offer deals throughout November and even into October.
“What we saw with retailers last year was that they recognized they were having so many delays with supplies coming in that they had to pivot,” Gianchandani said. “So what you’ve seen now is that holiday sales have increased.”
Black Friday became Black November, which is now Black October, she said.
As supply chain issues persist, stores may try to steer online shoppers away from home deliveries, which could be delayed as holiday shopping picks up.
“You see a lot more buying online, picking up in store,” Gianchandani said. “They allow you to do your research and figure out what you want online… But then they bring you back into the store and they want to create a customer experience.”
This year, the steep discounts that retailers started offering in the summer due to excess inventory could carry over into the holiday season, Anderson said.
The question will be whether the items stores have overstocked are the items that are in demand for holiday shoppers or not, Anderson said.
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Will there be continued shortages?
But retailers appear to be more optimistic that supplies will hold up this year.
Last year, according to KPMG Annual Holiday Shopping Report.
This year, 59% said they expected minimal shortages and 30% said they expected no shortages.
Consumers could also buy less due to inflation, which means less demand for goods that are in short supply.
Sixty-five percent of consumers interrogates by enterprise software company SAP said they plan to cut holiday budgets this year, including 69% of those from Gen Z and 76% from Millennials.
While some of these reductions will come from fewer and fewer dining out trips, many consumers said they also expect to reduce spending on fashion and beauty (46%) and electronics (37%).