The Holiday Season Squeeze

The problems surrounding the global supply chain of consumer goods may intensify for the remaining quarters of 2021 as the coronavirus re-emerges, creating issues in the face of holiday retail sales.

While the pandemic created international logistic issues before, the emergence of the delta variant comes at a particularly bad time considering retailers currently need their inventories on the way for the holidays. Several bottlenecks have occurred as a result that are disrupting the flow of goods.

This includes a shortage of shipping containers and space on ships to transport them across seas, as well as factory shutdowns in Thailand, Vietnam, and China. Retails giants like Amazon and Walmart may be able to acquire enough space on said ships, but smaller chains may not be able to compete in this new logistical scramble. While these issues are likely to be lessened as more nations become vaccinated, it is unlikely to happen before the holidays.

Holiday inventory fulfillment is going to be a costly situation for U.S. retailers. There will be higher costs for labor, freight, and manufacturing. These attribute to what Salesforce predicts as an extra $223 billion extra in costs of goods sold. Despite supply chain issues, it is anticipated that consumer demand from post-pandemic lifestyles will still result in a sizeable holiday season.

Article by: Kennedy Richardson, Market Strategist