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Sunday, January 23, 2022

Global Supply Chain Delays to Affect Holiday Season

Ongoing global supply chain disruptions are about to collide with the holiday shopping season, with retailers caught firmly in the middle.

In October, Digital.com surveyed 1,250 U.S. small business owners to find out how product shortages will affect their inventory and prices as holiday shopping ramps up. Key findings include:

  • 53 percent of small business owners anticipate inventory shortages through the 2021 holiday shopping season
  • Specialty stores and grocery stores will be hit hardest, with 3 in 10 predicting 60 percent to 90 percent less inventory than usual
  • To cope with inventory shortages, 58 percent of retailers plan to raise prices; one-third plan to increase prices by 40 percent or more
  • 50 percent of retailers who anticipate inventory shortages recommend consumers start their holiday shopping ASAP

According to Digital.com expert and digital marketing executive Huy Nguyen, retailers can take steps to help mitigate the effects of supply chain shortages on their inventory.

“The supply chain situation can change rapidly, so businesses should set up accounts with alternative suppliers and take the opportunity to find complementary products,” Nguyen said.

For businesses that are unsure whether they will be affected, Nguyen added, “Communicate with your suppliers now, and see if they expect supply chain or operational challenges and how they plan to address them. If possible, order more inventory in advance, or ask suppliers to pre-order so you have priority when new products are available.

“Specialty stores are hit harder by the supply chain shortages because of their niche offerings and limited options when it comes to manufacturers or suppliers,” Nguyen said. “Department stores and discount stores have more options to find alternative suppliers and offer a variety of different products.”

However, shoppers may still be out of luck at big-box department stores, depending on what they are looking for. Nearly 4 in 10 department stores expect to have 30 percent to 50 percent less inventory this holiday season, and 58 percent of businesses experiencing inventory shortages will raise prices

Businesses with the overhead of brick-and-mortar locations are more likely to raise prices on their goods this holiday season. Sixty-three percent of in-person retailers who anticipate inventory shortages are planning to raise prices, compared to 53 percent of online-only retailers, and 57 percent of retailers that operate online and in-person.

Customers can expect to see price hikes that range from eyebrow-raising to eye-popping. Thirty-five percent of retailers will increase prices on in-demand items by 40 percent or more, while a similar number, 37 percent, are raising prices 10 percent to-20 percent.

Specialty stores with inventory shortages are most likely to increase prices by a significant amount. Twenty-six percent of these retailers plan to increase prices by 40 percent, while another 18 percent will raise prices by 50 percent or more.

Shoppers looking for special ingredients and seasonal foods also will see higher-than-usual prices. Twenty-two percent of grocery stores experiencing inventory shortages will compensate by raising prices 50 percent or more. Even discount retailers are feeling the pinch, with 3 in 4 planning to raise prices between 10 percent and 30 percent this holiday season.

In light of these shortages, some retailers think if shoppers haven’t already started their holiday purchasing, they’re behind the curve. Fifty percent of retailers who are anticipating inventory shortages say consumers should have started their holiday shopping in October. Another 28 percent recommend starting in November. Only 19 percent believe shopping in December gives consumers enough time to get everything on their wish lists.

Nguyen also encourages consumers to start shopping early and to consider alternatives to traditional gifts purchased in stores.

“If you can’t find that perfect gift, consider giving someone a gift card to their favorite store or restaurant,” he says. “Gifting experiences has also become very popular recently, and there are many local options to choose from.”

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