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Supply Chains Could Be The Grinch That Steals Retail’s 2021 Holiday Season

The bottlenecks at major container ports are not new: key factory closures in Asia have been a rolling problem for months, while a shortage of truck drivers across Europe has only recently emerged.

While none of these problems is large enough on its own to grind global commerce to a halt, when taken together, this crippling confluence is starting to cause real concern in retail circles – especially since it’s happening at the worst possible time of year.

Pessimists might suggest it’s time to “call off Christmas” and punt the winter holiday gift-giving season deep into Q1. Optimists, meanwhile, are holding their ground while essentially hollering “Remain calm!” to increasingly panicked passengers.

At the same time, more pragmatic market watchers occupying the middle ground will concede this much: supply chain snags and the rise of the COVID-19 delta variant will likely translate to fewer choices and higher prices in the run up to Christmas.  And it’s not just consumer goods and toys and such that are under threat, as certain types seasonal favorite foods may also be off the menu too.

The latest spanner in the works came in China, where a terminal at the Ningbo-Zhoushan Port south of Shanghai was shut down for two weeks after a dock worker tested positive for COVID-19. But if Ningbo-Zhoushan were just any other port in the storm, it might not be worth even familiarizing yourself with the name. Unfortunately, it happens to be the third-largest container port in the world in terms of volume, and the impact of its partial closure has stretched supply chains that were already at their limit due to problems including ongoing container shortages and coronavirus-linked factory shutdowns in Vietnam and other manufacturing hubs.

Further reading: Supply Chain Woes Crippling US Food Sector

3 Strikes And You’re Out Of Luck

In fact, the Ningbo shutdown will add to a backlog that followed a similar closure in June at Yantian, a port located 50 miles north of Hong Kong. Although that port partially reopened after just a few days, it took almost a month to resume normal services, causing congestion to spill over to additional ports.

Retailers say the supply chain bottlenecks will limit their ability to restock inventory ahead of the crucial Christmas holiday season. The U.S. shoemaker Steve Madden said in an earnings call last month that it has already moved about 50 percent of the production of its women’s range from China to Brazil and Mexico to shorten delivery times.

“In terms of the supply chain, we could talk about this all day,” the company’s CEO Edward Rosenfeld told analysts on the call. “There are challenges throughout the globe. There is port congestion, both in the U.S. and China. There are COVID outbreaks at factories. There are challenges getting containers. We could go on and on.”

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Steve Madden is one of several brands to be hit by factory shutdowns in Vietnam, a nation responsible for almost 40 percent of the volume of goods imported into the U.S. by sea over the past 12 months to July, according to S&P Global Panjiva. The Southeast Asian nation has been susceptible to factory shutdowns because the vast majority of its worker population is still unvaccinated.

Crocs CEO Andrew Rees said in a conference call with investors last month transit times from Asia are approximately double their historical level. “That’s been the case for some time and we’re expecting to live with that.”

The West Is Also A Mess

Europe is feeling it too. Last week, reports began to surface that suggested the speed of Germany’s economic recovery was at risk due to widespread shortages of everything from semiconductors to plastics to more mundane items such as wooden pallets.

Meanwhile in the U.K., fast-food chains such as Nando’s and KFC reported running low on chicken, with the former temporarily closing 50 of its outlets last month. McDonalds reported that a number of its British restaurants have stopped selling milkshakes. The supermarket chain Iceland has said it was struggling to stock up on everyday essentials such as bread and soft drinks.

Read more: McDonald’s UK Out Of Milkshakes As Nationwide Shortages Frustrate Consumers

Supply chain logistics in the U.K. have been worsened by an acute shortage of truck drivers related to Brexit, causing a backlog of containers waiting to be unloaded, meaning products are unable to go the last mile to warehouses and stores. That has a knock-on effect, with container ships stuck outside port unable to offload their goods, which in turn is causing a shortage of containers themselves.

In a recent interview with the BBC, John Allan, chairman of the U.K.’s biggest supermarket chain Tesco, warned that a shortage of heavy goods truck drivers has prevented the company from stocking up for the holidays.

“At the moment we’re running very hard just to keep on top of existing demand and there isn’t the capacity to build stocks that we’d like to see,” he told the BBC. “So, in that sense there may well be some shortages at Christmas.”

Check Out: Consumer Anxieties Pull Holiday Shopping Into Back-To-School Season

Some U.S. firms, notably toy makers such as Hasbro and Mattel, have promised to work with more ocean and air freight carriers, utilize more ports and source products earlier from multiple countries to ensure product availability ahead of the holiday season. But it’s becoming apparent there won’t be enough capacity to go around and that whatever products are stocked up will only come at the expense of others.

The message for consumers is to get your shopping done early and to have more than one gift idea up your sleeve so you’re not caught short and empty-handed.

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