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How Small Retailers Can Cope With Supply Chain Challenges This Holiday Season

  • Consumers are being urged to start their holiday shopping early due to supply chain disruptions
  • Higher prices and delayed shipments among the headaches facing retailers
  • How small business owners can work toward resilient supply chains to avoid disappointing customers

Summary by Dirk Langeveld

Many customers dread the ever-growing creep of holiday advertising. While Black Friday once marked the debut of Christmas songs and holiday shopping promotions, they are now frequently appearing as soon as stores take down their Halloween decorations.

In 2020, retailers made the case for customers to get an early start to their holiday shopping as a way of supporting local businesses. Stores suffering an economic hammer blow from the emergence of the COVID-19 pandemic in the spring suggested that an early boost in holiday sales would help with the fourth quarter earnings that make up an outsized portion of these businesses’ revenues.

This year, retailers are making the same case for early holiday shopping, but for a different reason: if customers don’t get a jump on their purchases, they may find slim pickings or not be able to receive an item until the new year.

Supply chain issues

A series of supply chain issues has been dogging retailers this year, leading to delays in shipments, higher prices, and other headaches. For customers looking to check items off their Christmas list, it means they’re more likely to encounter a more modest selection of products this year as well as higher prices.

Issues disrupting the supply chain include a shortage of shipping containers, a lack of laborers in specialties like trucking and longshoremen, reduced manufacturing output in Asia due to COVID-19 disruptions, and strong consumer demand putting stress on the system. Several other factors, such as a lengthy blockage of the Suez Canal, have also contributed to disruptions since factories began ramping up output after cutting back at the start of the pandemic.

The Biden administration has struck agreements with businesses in an effort to unjam supply chain bottlenecks in the lead-up to the holidays, including 24/7 operations at ports in Los Angeles and Long Beach. Major retailers and delivery companies have also committed to longer hours to assist in relieving backlogs. However, some logistics experts have suggested that supply chain issues are complex enough that the White House’s actions will only have an incremental effect and are likely to persist up to Christmas.

The situation has raised concerns among small business owners, who have often been coping with delays for more than a year and fear that larger companies will have more clout and gain a competitive edge by having their needs met sooner. Large businesses have been able to hold more sway in securing space on container ships, or even resorted to costlier solutions such as turning to air freight or chartering their own vessels.

Retailers also see a potential risk of lower sales despite strong demand if they aren’t able to provide a sufficient quantity of quality of inventory. However, September’s retail sales report reflected resilience in the sector, with spending going up despite forecasts of a drop in sales.

The report may reflect an early jump on holiday shopping, as retailers have been encouraging consumers to start shopping now to find an adequate selection. October’s report will likely give a preview of this year’s holiday spending, especially as the COVID-19 pandemic strengthened reliance on e-commerce and diminished the impact of major shopping occasions like Black Friday.

How small retailers can cope

Retailers have been exploring different strategies to keep their shelves adequately stocked for holiday shoppers. Some have been buying up older stock that normally would have been liquidated to ensure that they have enough products available. Companies have also adapted their orders to acquire more compact and valuable items, which can be shipped in greater quantities and have a higher profit yield.

The holiday shopping season presented supply chain challenges to retailers long before the pandemic. Stores need to anticipate what consumers will want to purchase, while also purchasing enough inventory to meet demand but not so much that they’re left with excess stock on December 26.

Retailers have been urged to start planning for the next holiday season as soon as the last one is over. Strategies include long-term forecasting for consumer trends and initial purchases of goods with perennial demand, followed by planning closer to the holiday season for replenishing inventory, capacity management, offering discounts, and liquidating overstock.

During the 2020 holiday season, which was also accompanied with considerable uncertainty due to the COVID-19 pandemic, the cloud computing company NetSuite advised retailers to place emphasis on direct-to-consumer sales, be more conservative with their inventory, and start early promotions.

By building risk management into their supply chain strategy, retailers can better weather disruptions they encounter. Options include forming a backup plan for what to do if they can’t acquire the goods they want, strengthening relationships with existing suppliers and vet alternate suppliers as needed, and offering clear communication with customers on any supply chain issues they’re encountering.

There are numerous options available to businesses to form and strengthen relationships with manufacturers, suppliers, and distributors. These include assessing the quality and affordability of their products, customer service, and whether a minimum order is required.

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