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With retailers facing supply chain issues and scrambling to hire, 'tis the season to start holiday shopping early. 'This isn't crying wolf this year'

Lauren Zumbach, Chicago Tribune on

Published in Business News

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.

“At this point we feel optimistic that we will deliver on all existing commercial commitments that we have made this year, but we did not want to put our retailers’ holiday business in jeopardy by continuing to accept new orders that we do not feel confident about delivering in time,” said Filip Francke, CEO of Ravensburger North America and global head of games.

Ravensburger hopes to resume taking orders in the fourth quarter, Francke said. In the meantime, the company is paying for premium shipping services and expanding its production in Europe, where supply chains are experiencing fewer delays than those between the U.S. and Asia, Francke said. Ravensburger is also working with U.S. warehouse partners to offer more incentives and training to help attract employees.

Rick Derr, owner of Learning Express Toys in Lake Zurich, said he appreciated the notice Ravensburger gave so he could get orders in early.

Even with the supply chain disruptions, Derr said he isn’t worried about having empty shelves this holiday season. While about half the toy manufacturers he placed preorders with are delivering products four to six weeks late, he still expects they will arrive in plenty of time for the holidays.

Still, he encouraged parents to shop early.

“This isn’t crying wolf this year,” he said. “This is my 26th Christmas and nothing has been so built up as this, but this time it’s real.”

Books are seeing disruptions too, particularly when it comes to illustrated books that are typically printed overseas.

Representatives selling those titles told Mary Mollman, owner of Near West Side bookstore Madison Street Books, to order everything she thought she needed upfront, because they weren’t sure they’d be able to deliver more copies, Mollman said.

The bookstore, which held its grand opening days before the first pandemic shutdown in spring 2020, has had some “touch and go moments” trying to stay afloat and typically tries to order conservatively, Mollman said. This year she’s placed some bigger orders for highly anticipated titles to avoid being caught short-handed over the holidays and encourages customers to shop early or preorder.

Other large companies cited concerns about apparel and footwear.

Both Lululemon and Dick’s Sporting Goods cited challenges with factories in Vietnam facing COVID-19-related closures on top of the longer shipping times, according to recent earnings calls and investor conferences.

Both retailers said they are shipping some products by air to avoid delays, and Lululemon is shifting some production out of Vietnam.

 

Walmart and Target chartered ships just for their goods in hopes of trimming transit times. Both are placing larger orders earlier in the season, though Walmart CEO Doug McMillon said at an investor conference earlier this month that the company “would take even more inventory if we could get it, especially in some categories.”

McMillon said the supply chain disruption is “more dramatic” than he can remember. “There have been various challenges, but not anything like this.”

The supply chain issues could make big holiday discounts more scarce.

Transportation costs have “exploded,” said Douglas Kent, executive vice president of the Chicago-based Association for Supply Chain Management. Companies are paying as much as 10 times more to transport a shipping container’s worth of goods than they did two years ago, and shortages of workers are pushing wages up, he said.

“Somebody has to pay for that,” he said.

While supply chain companies are trying to recruit more truck drivers and port and warehouse workers, retailers are scrambling to staff up ahead of the holiday rush. Amazon, Kohl’s, Dick’s Sporting Goods and Gurnee Mills mall all held hiring events in recent days.

Retailers have made fewer big seasonal hiring announcements than usual, but that’s likely because many have been in hiring mode for months, said Andy Challenger, vice president at Chicago-based outplacement firm Challenger, Gray & Christmas.

The firm expects retailers to add about 700,000 workers this holiday season.

In addition to the usual push to hire for the holiday rush, retailers are still catching up to pre-pandemic employment levels, Challenger said. There were 278,100 fewer people working in the sector in August compared with the same month two years ago.

“With a labor market with thousands of open jobs apart from holiday demand, that creates a real threat to the health of the business,” said Shannon Warner, a partner in consulting firm Kearney’s consumer practice.

Many retailers have been boosting pay to attract employees. Lululemon, which announced plans to hire 8,000 people in North America last month, including more than 100 in Chicago, said it will raise minimum wages to $15 or $17, depending on the employee’s role and location.

Dick’s Sporting Goods, which recently said it plans to hire 480 seasonal employees in the Chicago area and 10,000 nationwide, had two wage increases over the past year that collectively made for “upper single digits to low double digit kind of wage increases,” Chief Financial Officer Lee Belitsky said during an earnings call last month.

Others are offering bigger-than-usual signing bonuses, like Amazon, which is looking to hire 7,700 employees in Illinois as part of 125,000 new transportation and fulfillment jobs nationwide, on top of 75,000 new jobs the company announced in May. The Illinois jobs have an average starting wage of $16 per hour and can come with bonuses of up to $3,000 in certain locations, including the company’s warehouse in Monee.

Kohl’s, which is looking to fill nearly 1,800 open jobs in the Chicago area, is also dangling bonuses of $100 to $400 for employees who work through the holiday season.

An end to federal pandemic unemployment benefits earlier this month could push some people into the workforce, but it likely won’t prompt an “immediate bounce back,” Warner said.

People are still concerned about the delta variant and navigating child care issues, and workers have more options than they used to because so many industries have openings. That could be a hurdle for retailers, whose jobs may be more difficult than usual because of increased conflict with customers, particularly around mask policies, or a shift to online shopping that has store employees rushing to fill orders, Warner said.

Still, Amazon said Friday it received more than 500,000 applications for U.S. corporate, technology and hourly jobs since Sept. 1.

Hiring needs aren’t limited to retailer’s stores and warehouses. Package carriers UPS, FedEx and the U.S. Postal Service plan to hire 100,000, 90,000 and 40,000 seasonal employees, respectively, after a 2020 holiday season marked by shipping delays as consumers did even more of their holiday shopping than usual online.

UPS is offering weekly retention bonuses in certain areas including Chicago, where it aims to hire 5,000 people ahead of the holidays. It’s also emphasizing the potential to turn a seasonal job into a permanent role and streamlined the application process to make conditional job offers in as little as 30 minutes, said spokesman Dan McMackin.

This year’s job market is the tightest the company has seen, and unusually unpredictable, McMackin said.

“It’s going to be a challenge, but I think our experience … will carry the day,” he said.

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