The Supply Chain Crisis Will Impact Your Holiday Shopping

Published on: Nov 9, 2021
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As an American consumer, you’ve do doubt heard about the supply chain crisis, but what does that mean for your holiday shopping? For one, some items that are normally manufactured overseas may be harder to find in stock for the next few months. While that means some household necessities, that also extends to items like consumer electronics, toys, and other items that make up a large portion of our holiday purchases.

While the world has begun to recover from the economic disruption of the COVID-19 pandemic, the delayed reaction has been felt in the supply chain. Industrial shutdowns around the world slowed production to a relative crawl, leaving many businesses struggling to meet consumer demands, both during lockdowns and since.[1]CNBC.com, October 18, 2021

Challenges continue, even as manufacturing picks up, with worker shortages and a fight to locate the materials needed for production complicating the struggle. President Biden worked an agreement with the port of Los Angeles in recent weeks to operate 24 hours a day, which has helped reduce the number of container ships offshore to 58 from a peak of 73.2.

 

 

Brace for Fewer Selections and Higher Prices

Ken Hicks, CEO of clothing retailer Academy Sports, told Bloomberg that shoppers “will have to settle more because they [retailers] just won’t have as good of a selection.” Delays and shortages along the supply chain have left mountains of products stuck in factories in Asia or in ports in the US, unable to make their way to stores. Toys, which are in hot demand during the holiday season, have been particularly badly hit. One toymaker, Basic Fun, told Bloomberg that around $8 million worth of its toys were sitting in a factory in China and that it couldn’t move them because of a shipping container shortage. One of the world’s largest toymakers, MGA International, said it recently had more than 600 containers filled with toys that were stuck in the port of Los Angeles for six weeks waiting to be unloaded.[2]BusinessInsider.com, Mary Hanbury, October 4, 2021

Falling demand in the first half of 2020, followed by a surge at the back end of the year, has led to delays, port traffic jams, and blockages across the supply chain. The lack of containers and dock workers is only making the situation worse. “I’ve been doing this for 43 years and never seen it this bad,” Isaac Larian, CEO of MGA, told Bloomberg. “Everything that can go wrong is going wrong at the same time.”[3]BusinessInsider.com, Mary Hanbury, October 4, 2021

Delays and shortages could also mean fewer discounts and higher prices for consumers over the holidays. Experts are forecasting price increases of anywhere between 5% and 30% during this period. “The installation of raw material and labor has gone up exponentially,” Larian told CNN in an earlier conversation. “We’ve seen a 23% increase in the cost of product in China without the logistics. That is going to translate to higher prices with retail.” Two of the largest toymakers, Mattel and Hasbro, already raised prices earlier in the summer to absorb higher shipping costs.[4]BusinessInsider.com, Mary Hanbury, October 4, 2021

 

 

Retailers Are Making the Supply Chain Crisis Even Worse

Fears of holiday-season stock shortages have prompted some retailers to begin over-ordering key items, a supply chain expert says — a development that risks piling further pressure on already stressed supply chains. Jonathan Savoir, CEO of supply chain technology company Quincus, told Insider that retailers are ordering products from multiple manufacturers, rather than a single supplier, as they seek to minimize the risk of shortages this holiday season.[5]BusinessInsider.com, Mary Hanbury, October 21, 2021

 

 

Can We Expect Big Discounts from Retailers After the Holidays?

However, according to Business Insider, while the supply chain crisis might stop you from getting your holiday gifts on time; it could also lead to big discounts over the next few months, analysts say. In a note to clients reported by Marketwatch, a group of BMO analysts said delays across global transportation networks mean many products will miss their intended season — and therefore end up being discounted.[6]BusinessInsider.com, Mary Hanbury, November 9, 2021

While supply chain delays had initially come from manufacturing issues such as factory shutdowns, the problems are now mostly down to a breakdown in the freight, rail, and trucking industries, they said. “The issue is actually less one of lack of supply and more one of an inability to get the supply to stores,” BMO analysts wrote, adding, “It is simply a matter of time before the late product hits the floors and begins to drive up promotions.”[7]BusinessInsider.com, Mary Hanbury, November 9, 2021

 

So, yes, we all complain about how the holidays seem to come earlier every year, but in this case, it’s a good thing to bear in mind. If you can, it’s a good idea to prepare for the holidays early. In addition, if you have any concerns about the supply chain crisis concerning your financial strategy, we welcome a chance to answer your questions. Just give us a call to schedule a complimentary consultation.

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References

References
1 CNBC.com, October 18, 2021
2, 3, 4 BusinessInsider.com, Mary Hanbury, October 4, 2021
5 BusinessInsider.com, Mary Hanbury, October 21, 2021
6, 7 BusinessInsider.com, Mary Hanbury, November 9, 2021

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