Christmas Stocking: Out of Stock

By Benjamin Sherry | December 2, 2021

The early bird gets the worm. If you have your eyes set on a brand new pair of jeans, phone, or toys for the kids, you may want to start your Christmas shopping early. As Marcus Carmon, executive director at TMX Global, simply states when discussing shipping delays, “if it wasn’t on the water four weeks ago, it's not going to be here for Christmas”.

The supply chain issues are posing a massive challenge for retailers to get much desired products on the shelves. There are numerous reasons for the supply chain problems that have led economists to reduce world economic growth forecasts. The first problem faced is recovering from the pandemic. While nations such as the United States have largely recovered from the pandemic due to vaccine distribution, less developed countries without the vaccine struggle to reopen businesses. This is particularly true in places like Vietnam that often produce the raw materials needed to make textiles, yet their factories have been closed for months. There has been a lack of an adequate labor force and outbreaks are still being caused by the pandemic. In other major trade hubs like China, there is a mandatory quarantine period of a week before ships can be filled with Chinese goods to be shipped to the rest of the world. Ships wait in harbors consuming great amounts of fuel, thus adding to freight costs. When one considers the extra costs of shipping, raw material shortages, and an inadequate workforce, it is no wonder that prices of goods continue to rise. President Biden has met with President Xi Jinping on November 15 and one would expect the supply chain issues to be at the forefront of discussion. However, a senior official within the Biden administration states that tariffs and supply chain problems are not something that he expects to be a significant point of discussion. Surprisingly, while supply chains take a backseat, the Biden Administration is rather focusing on relations between Taiwan and China.

What are retailers doing to combat the supply chain problems? The answer is substitutes and different suppliers. Since out of stock messages have risen over 32%, especially for apparel, companies are giving customers alternatives. One such example is a pair of jeans made by two different suppliers, yet look fairly similar in style and color. A customer could purchase the alternative even though it is not the exact match. Of course, this does not work for all products such as specific dresses or consoles. However, these alternatives are likely to ship faster than waiting for the specific item to be restocked. Companies have also turned to upgrading their personalization algorithms to help customers who are searching online for items to see their multiple options. And finally, doorshippers like Wayfair are having suppliers ship products directly to consumers and other corporations are diversifying their suppliers.

Overall, global supply chain management does not seem like it's going to improve anytime soon. However, this is more of a message that shopping needs to be done earlier this year. Most customers are not going to find highly sought after products on Black Friday. If you wait until the last minute, it is likely that the alternates will be minimal and a gift card will be your best option.

Sources: WSJ