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Supply Chain Struggles Won't Lead to Blue Christmas for Retailers. Here's Why.

Even major retailers including Amazon, Walmart, and Target have struggled to keep certain items in stock.

Retailers, even the really big ones including Walmart (WMT) - Get Walmart Inc. Report, Amazon (AMZN) - Get Amazon.com, Inc. Report, and Target (TGT) - Get Target Corporation Report, plan for the holiday shopping season well in advance of the fall when their stores get taken over by items on people's wish lists. 

That's challenging in a regular year, but it's even harder when the impact of a pandemic lingers and threatens to flare up via new variants.

That has left leaders across all of retail having to make decisions on inventory without being able to fully rely on past patterns of consumer behavior. 

What people bought last year, during a lockdown, doesn't really inform what might happen this year when things are more open. But the threat of lockdowns, or even just people being more cautious about where they go, remains.  

That and longer, more complex shipping times, have lead to a level of uncertainty that has created what many have called a supply chain crisis. 

That has led to bigger companies looking to do whatever they can to keep their shelves stocked and their customers happy, GXO Logistics Chief Investment Officer Mark Manduca told TheStreet via an email interview.

"We see the three big trends of eCommerce, outsourcing, and automation continuing into 2022. Supply chains are the backbone of the global economy and the challenges affecting the world show just how critical they are," he wrote. "That’s why in 2022 global businesses will look to protect against the disruptions they faced this year."

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How Big Retail Is Handling Supply Chain Woes

Walmart and Target, along with Home Depot (HD) - Get Home Depot, Inc. Report, have committed to running their logistics operations 24/7 through the end of the holiday season (and maybe longer).  

FedEx (FDX) - Get FedEx Corporation Report and UPS (UPS) - Get United Parcel Service, Inc. Class B Report will be doing the same. Even President Joe Biden has tried to solve the problem by pushing the 24/7 model. 

"After weeks of negotiation and working with my team and with the major union and retailers and freight movers, the Ports of Los Angeles announced today that it’s going to begin operating 24 hours a day, seven days a week," he said in a recent statement.

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The challenge is that adding hours to when ports are open only solves part of the problem and the president weighed in on that as well.

"For the — for the positive impact to be felt all — all across the country and by all of you at home, we need the major retailers who ordered the goods and the freight movers who take the goods from the ships to factories and to stores to step up as well," Biden said. "These private sector companies are the ones that hire the trucks and railcars and move the goods."

FedEx and UPS move about 40% of all packages in the U.S. 

Amazon (AMZN) - Get Amazon.com, Inc. Report recently passed FedEx to become the third-largest package delivery player in the U.S., behind only UPS and the U.S. Postal Service (USPS), according to a  recent Quartz article.

A Holiday Season Like No Other

Holiday creep, where the shopping season keeps extending longer and longer, may have actually helped big retail, according to Manduca.

"The peak season is just hitting its high note now, and it’s been a bit longer and flatter than recent years," he wrote. "Consumers started shopping earlier and news reports suggested they visited more stores in-person thanks to the availability of vaccines. Holiday shopping is memorable, and consumers are eager to get that in-store experience once again."

Even though sales for the period encompassing Thanksgiving through Cyber Monday dropped by 1.4% compared to last year, according to data from Adobe ADBE the National Retail Federation expects the holiday shopping season to be even bigger than it originally forecast. 

NRF Chief Economist Jack Kleinhenz said that sales could climb year-over-year by as much as 11.5% compared to In November and December. That's higher than an earlier NRF estimate that overall sales for the two months would rise by 8.5% to 10.5% 

“Now that we’re in December, the holiday shopping season is nearing the finish line,” Kleinhenz said. 

“The question is how have factors ranging from economic indicators to the twists of the COVID-19 pandemic affected the season so far, and what role will they play in the weeks that remain?" he said. "There’s no crystal ball to provide a definitive answer, but the latest data is encouraging and provides useful insights."

He attributes the strong numbers to both retailers and their customers being willing to change behaviors.

“Consumers and retailers have both revised their playbooks and broken with previous traditions,” Kleinhenz said. “With the momentum we’ve seen so far likely to continue, it seems probable that we will exceed our initial projection.”