Supply Chain Slowdown Expected to Snag Holiday Shopping Season

The inflatable skeleton dragons and bags of “fun-size” Snickers are lining store shelves now, but maybe Halloween isn’t the holiday we should be shopping for.

Thanks to manufacturing holdups, shipping delays and labor shortages throughout the supply chain, it’s going to take longer and cost more for retailers and consumers to get the items they want for Christmas, Hannukah and other December yearend celebrations. The best way to tackle this year’s gift list is to shop early—and with an open mind and wallet, said experts in the University of Maryland’s Robert H. Smith School of Business.

“Let’s hope that Santa Claus is flexible,” said Martin Dresner, professor and chair of the logistics, business and public policy department. “The kids making their lists will also need to be flexible this year. They may not get exactly what they want.”

As with so many problems these days, those in the supply chain started with the COVID-19 pandemic. Last year’s holiday shoppers saw fewer product choices and shipping delays, with some gifts finally showing up weeks after the holidays. To anyone who thought this year would be better, no such luck.

What Gives?
For decades, companies have been streamlining their supply chains to reduce operating costs, said Dresner. That includes outsourcing production to Asia, particularly China, where manufacturing costs have been cheap and suppliers have been flexible with just-in-time orders. This has allowed companies to carry little or no excess inventory. It’s all very efficient—until it’s not.

Throughout the pandemic, workers in factories and ports who contracted COVID-19 have had to quarantine and miss work in numbers high enough to force dramatic temporary closures.

“The Chinese, especially, are cognizant of trying to stop the spread of COVID, so they have no problem shutting down entire cities,” Dresner said.

Things don’t get manufactured on time, and voila: supply shortages. ​

Adding to the labor disruption in this country, more than 4 million people exited the workforce during the first year of the pandemic. The transportation and logistics industry—warehouses, shipping firms, ports, rail companies—has been hit hard.

Today, amid the slow economic recovery, there still aren’t enough workers to unload shipping containers at U.S. ports and pick up goods by rail or truck to distribute them to warehouses and retailers. The problem has created record-breaking bottlenecks, with dozens of ships lined up offshore, waiting to unload at the ports of Los Angeles and Long Beach, the country’s busiest.

The shipping containers packing those cargo ships, meanwhile, have become scarce—and costly, said Jon Crocker, clinical professor of logistics, business and public policy.

The price of a 40-foot shipping container from Shanghai to Los Angeles is now nearly eight times higher than pre-pandemic levels, according to the Drewry World Container Index. Some exporters, importers and regulators are working to contain the volatility, which, unchecked, adds to inflation. French shipping company CMA CGM promised to cap prices and prioritize certain long-term customers until February 2022 to help stabilize the market through the holidays.

More Than Toys
The potential for disruption extends far beyond traditional holiday gifts of toys and games. As supplies tighten, grocery and warehouse stores may limit quantities – some are already stocking up on toilet paper again, as Costco announced it would limit purchases, Crocker said. “Whatever it is that people want, they may find it difficult to get and be met with bare shelves across retail sectors.”

All of those supply chain problems mean consumers should expect to pay more for items this year, as inflation picks up and retailers raise their prices, says marketing Professor Jie Zhang.

“There certainly won’t be as deep of discounts as we have seen in the past,” she said. Retailers are likely to scale back promotions as Dec. 25 approaches.

And consumers may have to take what they can get. Retailers took the pandemic lessons they learned last year and are offering a more limited assortment this year; they won’t be aggressively pushing specific toys, apparel or electronics. They’re also preparing to deal with consumer disappointment and complaints when they can’t meet demand.

Although holiday consumers may find fewer choices, higher prices and longer wait times, overall sales may still result in happy holidays for many retailers, said Zhang.

“Consumers have been hoarding cash and they are willing to shell out during the holiday shopping season,” she says. “Overall, sales will be good. But consumers may not be as happy for a variety of reasons.”

Advice for Holiday Shoppers
Shop early: Retailers are offering early season sales to hopefully flatten the shipping curve, marketing Professor Jie Zhang said.

Brace for a dull Cyber Monday: Zhang expects Cyber Monday to have noticeably fewer deals because of shipping delays. Still seeking a deal? Consider shopping in-store on Black Friday.

Get comfortable with curbside: Retailers are planning to incentivize consumers to order items online for in-store or curbside pickup, to ease the shipping burden.

For last-minute gifts, shop in-store: Procrastinators will be stuck shopping in stores, especially after Black Friday, if they want to get gifts in time for holiday giving.