The supply chain is the network by which products flow from the factories of suppliers to the inventories of retailers so they can be purchased by consumers. Corporate supply chains have been under pressure since the pandemic began, but the stress intensified in the latter months of 2021.
The California ports that receive about 40% of U.S. imports are now operating 24/7, but workers still can’t keep up with the rush of container ships arriving. In mid-November, there was a record backlog of vessels waiting more than two weeks to unload. Other U.S. ports are also congested, and severe shortages of truck drivers and warehouse workers have further slowed the distribution of goods.
Compounding supply-chain issues have been increasing freight and labor costs, delaying shipments, and leaving consumers with higher prices and fewer options.
The good news is that many businesses responded nimbly to challenging conditions, and some consumers have been proactive, too. Here’s a glimpse into how these kinks in the supply chain might affect your holiday shopping.
Are Retailers Ready?
Many of the nation’s largest retailers anticipated problems and went to great lengths to ensure that shelves would be stocked for the holiday shopping season. In many cases, this required paying much higher freight costs to charter their own smaller ships or cargo planes so they could bypass clogged ports.
Such costly measures are usually not an option for smaller retailers. In a November survey, 48% of small businesses reported that supply-chain disruptions are having a significant negative impact on their holiday sales.
The National Retail Federation forecasts record holiday spending of 8.5% to 10.5% above 2020 levels.
Poised to Spend
U.S. retail sales rose 1.7% in October, a surprisingly strong showing and the third monthly increase in a row. According to an annual NRF survey, a record share of consumers (49%) started their holiday shopping before November.
U.S. households have extra money to spend this year after amassing about $2 trillion in excess savings during the pandemic. This was largely due to historic levels of economic relief provided by the federal government, along with fewer spending opportunities due to lockdowns.
A Season of Inflation
With businesses paying more for the raw materials, packaging, labor, transportation, and fuel needed to produce and distribute products, a portion of the additional costs are being passed on to consumers.
Measured by the Consumer Price Index (CPI), prices across the U.S. economy increased 6.2% during the 12 months ending in October 2021 — the highest inflation rate in nearly 31 years. Grocery prices (food at home) rose 5.4% year over year.
Energy prices overall have climbed 30% since October 2020, and the natural gas that keeps many homes warm and cozy increased 28.1% year over year. Gasoline prices rose nearly 50% over the prior 12 months.
Shop Early or Be Flexible
A global shortage of computer chips, is limiting the production of all kinds of electronic devices, including cars, home appliances, laptops, smartphones, TVs, and gaming consoles. The availability of some brands of sportswear, shoes, and accessories could be affected by a COVID outbreak that shut down factories in Vietnam. Other reported shortages include jewelry, some popular toys and books, frozen turkeys, cardboard boxes needed for shipping, and Christmas trees, both real and artificial.
Projections are based on current conditions, are subject to change, and may not come to pass.
