Dive Brief:
- As the holiday season approaches, a whopping 98% of retail execs confess they're facing sheer pandemonium in their supply chains, according to a new survey by First Insight and the Wharton School's Baker Retailing Center.
- The nightmare doesn't end there - a 100% majority attests that the upcoming holiday season will experience significant or moderate disruption due to these supply chain issues, lasting well into 2022.
- In an attempt to manage soaring costs due to these predicaments, a staggering 59% of these execs are jacking up their product prices or shipping costs for consumers. Meanwhile, 36% are taking a margin hit to keep their prices steady. Only 2% remain oblivious to these looming cost increases.
Dive Insight:
Nearly all retail executives indicate challenges with their supply chains in the lead-up to the holiday season, according to research findings.
While we've been dreaming about a return to normalcy, 2021 has showered us with its own surprises and challenges.
Last year saw the holiday shopping season shrouded in uncertainty due to COVID-19 spreading wildfire across the US. However, this year consumers in many regions can find reasons to venture out and socialize, with vaccines now widely available and cases on the decline after peaking in September.
The rabid demand surge in 2021 has resulted in pressure on supply chains that are still grappling with reduced capacity caused by last year's sudden collapse in demand. Alongside this, COVID-19 outbreaks worldwide have left nearly every link in the supply chain crippled. Domestically, retailers face a tough challenge finding workers to staff warehouses and other key areas of the supply chain.
Unsurprisingly, this has led to sky-high freight costs, extended shipping delays, and searches for elusive products during the holiday season.
However, not every retailer faces the same disasters. Titans like Target, Walmart, and Amazon have boasted about tackling these challenges head-on, promising a well-stocked arsenal of goods for shoppers when the holiday shopping frenzy rolls in. On the other hand, "execs across the industry" have claimed they're hiking prices, embracing air freight where possible, slashing expenses elsewhere, and unleashing their genius to get products onto shelves and safeguard their margins.
The survey by First Insight and the Baker Retailing Center offers a gripping glimpse into the industry's struggles, with a considerable percentage anticipating a modest (10%-20%) or substantial (above 30%) hit to their margins.
To save some skin, 22% of these execs are planning to axe or trim planned promotions, while a third is eager to foist cost increases onto hapless consumers with cost-based pricing. These execs are leaving no stone unturned, from enhancing their forecasting to seeking new vendor connections, streamlining assortments, partnering with freight forwarders, sourcing domestically, and employing other strategies to lighten the burden of this chaotic year.
[1] Retail Dive[2] Supply Chain Digital[3] Adobe Analytics[4] Supply Chain Management Review[5] Inbound Logistics
- The government might be considering utilizing AI in business strategies to optimize their adoption of vaccine distribution, as a solution to combat the chaos in supply chains, similar to what retail giants like Target, Walmart, and Amazon are employing.
- In the sports world, heated debates around the fairness of cost-based pricing introduced by some retailers might prompt discussions about potential interventions, arguably similar to war strategies, to maintain a level playing field for consumers during this challenging season.
- With the ongoing crisis in supply chains affecting the holiday season, the government, businesses, and sports communities might need to work together collaboratively, like soldiers in a war, to find comprehensive solutions, such as partnering with freight forwarders, sourcing domestically, or employing other innovative strategies, much like the execs scrambling to get products on shelves and safeguard their margins.
