It wouldn’t be alarming to say that this Christmas is at risk due to widespread shortages of goods as the global supply chain undergoes issues.
Despite it being mid-October, we’re actually entering the peak season of shopping for the holidays. Yet rather than getting pumped up for strong sales, brands and retailers are at varying levels worried.
Earlier on this year, the expectation was that supply chain bottlenecks would have cleared up by now. Yet they’ve gotten worse and are likely to continue to get worse before they improve.
From Europe, major chains such as H&M can’t cope with demand due to delivery delays. While in the US, Nike has already cut its sales forecast and Bed Bath & Beyond has seen its stocks dip due to shipping delays. There is pressure across the board,” said Mark Tritton, the CEO of Bed Bath & Beyond. “And you will hear about that from others.”
While the CEO of MGA Entertainment, Isaac Larian, said: “I’ve been doing this for 43 years and never seen it this bad. Everything that can go wrong is going wrong at the same time.”
“There will be a shortage of toys this fall. It’s going to be a tough year for retailers.”
In short, retailers are having a difficult time filling their shelves.
Best case scenario
Analysts with rosier-tinted glasses forecast that during the fourth quarter, large retailers are set to really drive spending on their logistics – such as more expensive air freight and cargo ships – in order to hit their sales targets.
This would lead to lower profit margins yet would likely take larger chunks of the market share, with smaller competitors struggling to keep up and reorganize their own supply chains.
“We feel better than most that we’ll get our product here for holiday,” said Michael Mathias, CFO of American Eagle Outfitters. “There will be some players out here who might not even get their product.”
One strategy that appears beneficial is for brands and retailers to make goods closer to home, as it quickens lead times.
“Supply chain issues are getting continually worse,” said Janine Stichterm an analyst for Jeffries. “The key success factor will be the ability to supply product on time, or relatively on time.”
Yet the biggest risk that could affect every retailer is that Americans may end up spending less this season given that total inventory is set to be limited. Supply chain issues have led to hikes in shipping prices, strongarming some to consider which products to try and transport.
“Consumers lose because their options are limited,” said Jon Bass, CEO of Whom Home, and has been manufacturing goods for three decades. “It’s not a normal time in the business world. There is no stability.” Whom Home actually had to remove around 70% of its products from its website.
All the ingredients are in place for a disappointing Christmas cocktail, especially because for the last year and a half, we have come to rely heavily on the ease of ecommerce and the seemingly limitless array of options.
When it comes to the results of retailers this season, “there is a certain amount of underappreciating for the risk,” according to Jennifer Bartashus, an analyst for Bloomberg Intelligence. “Supply chain affects everybody. Meeting customer expectations in an environment where everything is up in the air is nearly impossible.
“Consumers might see news about port backups, but that won’t hit home until they try to buy the toy of the year and can’t get it,” added Bartashus. “That’s when they’ll hit crisis mode.”