Consumers are expected to be in the mood to spend this holiday season, but this isn’t the year to procrastinate.
With the COVID-19 pandemic snarling supply chains and threatening to leave stores and distribution centers short-staffed, consumers may need to shop early to avoid missing must-have items. Big discounts, too, could be tougher to come by, thanks to higher transportation and labor costs.
“COVID-19 is going to be the Grinch that stole Christmas yet again this year,” said Per Hong, senior partner in the consulting firm Kearney’s strategic operations practice.
Holiday retail sales are projected to rise between 7% and 9% this year, hitting $1.3 trillion, according to a forecast from Deloitte. The delta variant hasn’t slowed spending, and there’s “huge pent-up demand,” said Curt Bimschleger, managing director at Deloitte.
The challenge for retailers will be meeting that demand in a year when disruptions are hitting every step of the supply chain, from recent factory shutdowns in Asia to control the spread of COVID-19 to logjams at ports that lengthen shipping times to shortages of warehouse workers and truck drivers.
Retailers have been working to get ahead of the disruptions but “probably not as successfully as they’d want to be,” said Rick Maicki, managing director at Berkeley Research Group Corporate Finance.
Companies like Walmart and Target say they have at least 20% more inventory than last year. Still, the disruptions could make it tougher for retailers to restock items once they run out.
“If you see something you want … you’ll want to pull the trigger earlier, because you don’t know if it’s going to be there later,” Maicki said. “The flow of product is uncertain.”
Supply chain issues have hit everything from toilet paper to chicken wings to semiconductors since the start of the pandemic and are still affecting a wide variety of products across industries. But retailers and manufacturers are also starting to face challenges with popular gift items like toys, books and apparel.
German games, toys and puzzles maker Ravensburger warned retailers in North America it would stop taking new orders Friday as it contends with record-high demand and delays transporting goods to and within the U.S.