In our last post, we talked about whether the coming holiday season was likely to be a retail feast for brands and vendors, or a period of serious and unanticipated famine.
Among the factors we discussed, we noted that major, unforeseen supply-chain issues were likely to “kibbitz the action” for a great many retailers whose pre-season planning didn’t go far enough in insulating their supply chains from the impact of extraordinary events.
Given the ongoing supply-chain chaos, we decided to look a little more closely at what’s going on out there, and what you can do about it if you’re a brand or retailer hoping for a successful and profitable holiday season.
Supply-Chain Trauma Goes International: The Perfect (Retail) Storm
Unless you’ve already committed to going all-out ostrich as your response to the spate of traumatic events that have sent supply chains reeling, you’re aware of the biggest issues.
These include major port closures internationally, but especially in Asia, with terrible back-ups at American and European ports. There are also container shortages, truck and driver shortages, drastically increased costs for air freight, pandemic-related restrictions and regulations, international tensions involving China, and more.
Daunting, to say the least, especially if your history as a brand or retailer has involved reliance on supply chains you’ve come to regard as solid facts of your retail environment.
Let’s face it: supply-chain chaos has gone global, and that fact has already impacted the holiday shopping plans of consumers, retailers, and brands alike.
- Concerned Christmas shoppers are shopping earlier and may even be hedging their bets by buying desired or alternative items as they find them, rather than gambling on passing a sure thing in search of elusive out-of-stock items or better prices.
- Shoppers are also becoming polarized between online and in-store shopping, causing an earlier surge in online shopping, even in the face of uncertainties over fulfillment in time for Christmas. Others are opting to focus on brick-and-mortar shopping, where they can actually see what they’re buying – if it’s in stock and in hand, they’ll take it to eliminate uncertainty.
- Brands and retailers, from the large to small, are warning consumers about the likelihood of supply problems and their inability to guarantee any resolution to those problems before the holidays. Shoppers’ behavior is changing in response to these warnings, as nobody – but especially not an anxious online shopper – likes that sort of uncertainty. Even governments have adopted “the warning approach” to current supply-chain issues.
An alarming number of retailers have resorted to warning their customers – repeatedly – about delivery and stock issues for the coming holiday season. Among the factors motivating the warnings from large retail players, we see labor shortages, low fuel supplies amid a growing crisis, critical shortages of drivers, pandemic-related restrictions, and new shipping and border regulations.
As a result, brands are changing their holiday advertising to prepare shoppers in advance for the supply chain fall-out. Those that were sufficiently proactive to keep their supply chains functioning will be driving home their messages of availability and deliverability, while those who are having problems are trying to soften the impact and push products they can in fact supply.
And in the middle of it all, those responsible for maintaining accurate supply-chain and product availability/deliverability data for brands and retailers will – in between bouts of tearing their hair out – be scrambling to gather and maintain accurate information in the midst of multiple crises, all of which remain in flux.
Depending on what happens next, the evidence we’re seeing of a move toward inflation as demand rises and supplies fall across sectors could point to more retail trauma to come.
The European Union: Variations on a Theme
Meanwhile, complications unique to the UK, the EU, and the downstream impacts of Brexit are adding to the storm with a driver shortage verging on epic proportions.
Where the UK needs at least 100,000 more drivers due in part to Brexit-related visa rules that have driven out large numbers of EU nationals working as HGV (Heavy Goods Vehicle) drivers, the EU is short approximately 400,000 qualified drivers. Germany, France, Spain, and Italy have all been hard hit.
The factors behind the driver shortages are exactly what you’d expect. Pandemic-related restrictions, new health compliance problems with competing regulatory schemes, and changes in international shipping procedures caused major industrial slowdowns and shutdowns, plant and brand closures, and greatly reduced market numbers.
The impact of national lockdowns was crushing on multiple links within the global supply chains, labor supply, consumer demand, and production levels. With drastically reduced demand, the driver pool diminished accordingly. Now that demand is rising and markets are struggling to return to life amid vastly altered circumstances, they’re looking to all areas of their usual supply chains, including HGVs and their drivers, to just “be there.”
And in far too many cases, they’re not. There’s no immediate end in sight, according to some authorities, with ongoing pandemic-related developments, travel restrictions, international shipping controls, and shattered delivery systems hampering the ability of other supply-chain components to recover.
The supply-chain problems we’re seeing will depress manufacturing (and therefore slow growth) for some time to come in Germany and other EU member-states’ economies, as will the threat of inflation.
The USA: “The Bigger They Are…”
The same supply-chain problems plaguing both retailers and consumers in the UK and the EU are also driving American brands and shoppers crazy, from the smallest to the largest. Even those who have tried to be proactive in preparing for a problematic holiday season are struggling with the fallout as supply chains falter.
In some quarters, there’s a “make do with what we have or can get” mentality, and Retail TouchPoints reports that Salesforce is looking for retailers to reduce the number of separate items they sell by 5% in order to cope.
We understand the goal to reduce the number of shoppers who will be hit with too many out-of-stock messages, thereby maintaining satisfaction and protecting brand loyalty. However, we suspect that a reduction of 5% may not be enough to protect many retailers, especially if matters get worse.
But will they get worse?
Images of fleets of loaded container ships sitting off the coasts of New York and California, waiting to be unloaded, coupled with the omnipresent truck-and-driver shortages and the looming specter of inflation, suggest they probably will. Costco apparently believes so, as it’s now renting ships for its own use to get control of its supply chain in time and preserve as much of its holiday season as possible.
In fact, container shipping problems between China and the US seem to be getting worse, rather than better, and that’s already started driving prices up for popular Chinese goods.
We suspect many other brands and retailers, recognizing the shortage of labor, warehouse space, and both local and regional transportation infrastructure, are paying close attention – especially those brands and retailers who deal with consumer electronics, toys, and related products. They’re already being hit hard, with no immediate solutions in sight.
The Biden administration has spoken to this issue, and many Americans continue to look to the White House for a quick fix that will let brands and retailers “save Christmas.” Unfortunately, while there has been some activity from the White House in an effort break up the shipping log-jams, it will not provide the effective solutions everybody wants in time for Christmas.
The 2021 Christmas Feast: Serving Hard Lessons All Round
With rising demand in markets and shoppers ready to spend money accumulated during lockdown, brands and retailers are facing – at least potentially – some hard lessons this holiday season.
- It isn’t entirely about demand for in-stock and on-order products. Everybody is having to reconsider their supply chains in a unique way and under the most challenging of circumstances.
- There is no quick fix now, not even for the most localized of problems.
- Brands and retailers can no longer take for granted those parts of their supply chains that they never see and rarely think about because, in the past, those components always just been there.
- Retailers must rethink their “holiday processes” from a more proactive and shopper-centric perspective, especially as the sensibilities and expectations of online shoppers continue to evolve. Specifically, they need to account in their pre-season planning for previously distant supply-chain issues, and for their shoppers’ sensitivity to delay and growing demands for communication, transparency, and timeliness.
- In future, those responsible for managing holiday shipping plans must begin early, edit often, and stay fully informed about changing shipping costs, regulatory changes, and delays (regardless of cause). Constant monitoring…
- Retailers should be making holiday shipping planning a relevant consideration in ordering product and setting timelines for Christmas every year. Early ordering and careful elimination of products less likely to sell well should figure into such decisions. If this season teaches us anything, it’s that alteration of standard practices may make the difference between holiday retail success (or even survival), and catastrophe.
As challenging as much of this may sound, we also know that many brands and retailers are turning to innovative, creative solutions for the coming holiday season. At Purple Dot, we’re proud to offer just one piece of the puzzle with our waitlist solution, giving brands an easy way to embed pre-orders and out-of-stock management into their eCommerce store.
We know first-hand that some brands will have managed to address their supply chain issues, and many will do very well despite the 2021 supply chain challenges. And we can’t wait to see what 2022 has in store.
To that end, we wish you and yours the very best for the holidays.