Despite some easing of backlogs at the nation’s ports and retailers reporting they were flush with inventory this summer, supply chain woes are expected 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 Pompea College of Business, University of New Haven.
“Everything is fragile now, our supply chain is fragile, our crops are fragile … Labor is fragile,” she said. “Everything is colliding now. It’s the perfect storm.”
That storm includes global events like the war in Ukraine and China’s zero-Covid policies causing manufacturing shutdowns, as well as an actual storm, Hurricane Ian.
The Category 4 hurricane has led to increased demand for some products needed for recovery efforts, as well as stranded or destroyed equipment and materials, putting a strain on other parts of the supply chain, said Lisa Anderson, a supply chain expert and president of LMA Consulting Group.
Also in the mix:
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Supply chains are snarled
It’s not all bad news though, consumers may be able to take advantage of deals from retailers who need to move excess product that came in late last year.
“We have an inventory problem,” said Madhav Durbha, vice president of supply chain strategy at Coupa, a business software company.
“If you need a flat screen TV, a fantastic time to go shopping,” he said because businesses need to move that inventory out so they aren’t paying to store it.
But other items impacted by supply chain delays could instead go up in price so they don’t sell out too quickly, Durbha said.
He said it will be a bit of a “feast or famine” situation for a while as retailers learn from the challenges of the past couple of years, diversify their suppliers and transportation options and better anticipate consumer demands.
Another piece of good news is that shipping backlogs in southern California are down sharply, according to Oren Klachkin, lead U.S. economist for Oxford Economics.
“The data overall show that ports are in a better situation 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 the month of November and even in October.
“What we saw with retailers from last year is they recognized they were having so many delays with supplies coming in, they had to pivot,” Gianchandani said. “So what you’ve now seen is holiday sales are pushed up.”
Black Friday became Black November which is now Black October, she said.
Because supply chain issues do persist, stores may try to shift online shoppers away from home deliveries which could get delayed as holiday purchasing ramps up.
“You’re seeing a lot more buy online, pick up in store,” Gianchandani said. “They’re allowing you to do your research and determine what you want online … But then they’re bringing you back into the store and they want to create a customer experience.”
This year, the deep discounts that retailers began offering in the summer because of excess inventory, could continue through to the holiday season, Anderson said.
The issue 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?
Analysts said shortages of food products and baby formula are likely to continue through the holidays as well as electronics that require a semiconductor chip.
But retailers appear to be more optimistic that supplies will hold up this year.
Last year, 80% of surveyed retail executives expressed concerns over inventory shortages, according to KPMG’s annual holiday shopping report.
This year, 59% said they anticipate minimal shortages and 30% said they expect no shortages.
Consumers might also be buying less due to inflation, meaning less demand for goods that are in short supply.
Sixty-five percent of the consumers surveyed by business software company SAP said they plan to cut their holiday budgets this year, including 69% of those in Gen Z and 76% of Millennials.
While some of those cuts will come from traveling less and fewer meals out, many consumers said they also expect to reduce spending on fashion and beauty (46%) and electronics (37%).
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