Report — Supply Chain Crunch: ‘There Will Definitely Be Weeping Children This Holiday Season’
Jammed supply chains are already beginning to threaten the possibility that holiday shoppers will fulfill their wishlist, financial experts say.
Co-head of AlixPartners’ retail consulting practice, Joel Bines, told the Financial Times that retailers will have difficulty securing the “most in-demand” items this year for consumers to purchase for their families at Christmas.
“There will definitely be weeping children this holiday season,” Bines said. “Black Friday doesn’t exist; the holiday season doesn’t exist, not as it used to,” he explained about the change in supply chains that has forced stores to expand the holiday season. “It’s essentially October 1 to January 15.”
Savita Subramanian of Merrill Lynch Japan Equity and Quantitative Strategy Responsibility told Reuters the holiday shortage is related to the coronavirus. “COVID-related supply chain problems extend beyond consumer goods, and it’s easy to find long-term signs of global friction,” Subramanian said about the difficulty of stocking items on shelves early enough.
For instance, Lowe’s chief financial officer, David Denton, said the company has decided to try to circumvent the supply chain issue by shipping in items even earlier. After a quick start to Halloween and Christmas, consumers were buying items that were also “coming in earlier than we originally planned,” he said.
Denton noted that expanding the amount of time retailers have to cater to holiday shoppers stretches merchants’ capital, forcing them to allocate money to inventory where it sits until consumers purchase the items.
The earlier timeline is due to the delays consumers remember experiencing in 2020, he said, so last-minute shoppers will also perhaps shift shopping to earlier in the year. But that also benefits merchants.
“Merchants are going to enable that because they don’t want to tie their capital up,” Denton added, noting that stores will also try to free up shelve space by offering seasonal discounts to help the inventory continue to flow.
Cushman & Wakefield, a real estate company, told the Times that demand for the warehouse is at an all-time high, increasing the cost for companies to store the items that have been brought in earlier than normal.
Logistics Managers’ Index also indicates warehouse prices are at an all-time high, the Times reported.
Morgan Stanley additionally suggests that the supply chain shift will just create higher costs for consumers. “Consumer discretionary companies of all kinds are on the cross of supply shortages, higher logistics costs and higher labor costs,” they wrote.
Follow Wendell Husebø on Twitter @WendellHusebø.
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