Why Retailers Are Urging You to Start Your Holiday Shopping Early This Season
Author: Matt Burke, Sr. Advisor, International Banking
Checking items off your holiday shopping list may be a little harder this season. Shipping delays and supply chain disruptions have halted manufacturing and distribution on many popular goods, including consumer electronics. When pitted against rising demand, empty store shelves could be the norm as we enter December.
The Truth Behind Product Shortages
Several retailers have begun to encourage early holiday shopping this season for anyone hoping to score some of the most popular gift items. What lies beneath the threat of scarcity is a complicated mix of factors.
For one thing, many of the components, if not the goods themselves, are manufactured overseas. In order for finished products to reach the U.S. they must travel by truck, train or boat, a process that has been disrupted by a multitude of market issues.
First is the pandemic itself. While we may be returning to work and school in the U.S., low vaccination rates have resulted in higher instances of viral spread in other countries, encouraging governments to reinstitute social distancing measures. In China, for instance, where many goods and components are manufactured, facilities were closed leading into the fall to halt the spread of the Delta variant.
It was a similar situation in Vietnam and Malaysia, where a third of all shoes are manufactured, as well as chip components necessary for auto manufacturing. Measures taken to limit viral spread decreased output as well as the manpower necessary to run container ports, where products go for transport.
When shippers can’t get goods moved by sea, they take advantage of discount rates by shipping products in the bellies of commercial airliners. With COVID-19 restrictions forcing international travel down in 2021, this alternative has been largely unavailable, further enhancing delays.
But COVID-19 isn’t the only factor impacting supply chains and the availability of goods. Canadian wildfires this summer disrupted train routes, impacting products traveling overland into the U.S. Our own labor shortage is also limiting distribution, as container ships sit at ports waiting for enough manpower to offload items.
Logistics company Redwood indicates that 68% of all goods in the U.S. reach consumers via truck. However, the U.S. industry lost 6% of its labor force during the early stages of the pandemic and remains tens of thousands of jobs short as we enter the final quarter of the year. By some accounts even perishable goods, such as food items, have been delayed due to a lack of manpower.
Why all of these factors will impact the holiday season comes down to timing. Most holiday goods arrive in the U.S. between September and October. This allows retailers like Target, Walmart or BestBuy to stage goods such as games, TVs and computers prior to the Black Friday start of the shopping season. Challenges to distribution throughout the late summer and early fall could result in limited stock on many popular items as we reach the end of the year.
What Will Happen this Holiday Season?
Just as we saw shortages of toilet paper and cleaning supplies during the initial phase of the pandemic, product outages will plague the holiday season. In fact, many analysts are predicting widespread scarcities and lower selection of some of the most popular gift items, such as gaming consoles, televisions and sneakers, factors that ultimately lead to higher pricing.
To combat shipping delays, some retailers are taking matters into their own hands. Walmart and Home Depot, for instance, have chartered their own ships to move products, while Amazon is increasing its fleet of cargo planes.[i] Target, on the other hand, has taken a proactive approach. The retailer’s inventory was up 26% in June when compared to 2020 but doesn’t expect supplies to last into the end of the year for some items.
Meanwhile, Deloitte analysts also predict a holiday spending spree as Americans increase their buying power, growing sales in November and December by a predicted 7% to 9%. Higher demand will add fuel to an already raging fire, emptying store shelves faster.
For consumers who want to fill the season with gifts and smiles, there may be only one thing to do. Shop early but set expectations appropriately. You may not be able to get everything on your gift list this season.
About the Author
Matt has been in commercial banking since 2006. His experience in the Global Banking Group and Commercial Credit Analysis has given him a wide depth of knowledge in assisting clients reach their financial goals. As a member of the Global Banking team, Matt has an extensive knowledge of the foreign exchange markets, international payment options, international trade products and letters of credit.
The articles in this blog are for informational purposes only and not intended to provide specific advice or recommendations. When making decisions about your financial situation, consult a financial professional for advice. Articles are not regularly updated, and information may become outdated.