Halloween is still weeks away, but retailers are sounding warnings that it may already be too late to buy an artificial Christmas tree this year! Indeed, artificial trees manufactured in China and other low wage countries in Asia could be a hot commodity this year. Ongoing disruptions in supply chains caused by the COVID-19 pandemic together with labor shortages are making it difficult for retailers to stock their usual holiday inventories. A record number of cargo ships, mostly from China, are currently waiting off the coast of Southern California for a slot at the port in Long Beach where they will be unloaded onto trucks and trains and distributed to retail locations across the country. The logjam at the port has a domino effect. The longer it takes for a ship to be unloaded, the longer it takes for the ship to return to China to be reloaded. Furthermore, holdups are occurring at almost every part of normally smoothly functioning supply chains. For example, the global shortage of the huge containers that get stacked on cargo ships is creating slowdowns at ports in low-cost manufacturing locations like China and Vietnam. Delays in loading goods disrupts delivery schedules, frequently leading to too many ships arriving at the same time, further challenging already stressed systems.
Some retailers are stepping in to stop the Covid Grinch from coming. Walmart and Home Depot are working to circumvent some of the problems by chartering their own ships and looking for alternative ports of entry. Even with these efforts however, the companies will still be confronted by the labor shortages at ports and by the lack of long-haul drivers that have exacerbated the problems in traditional supply chains. Moreover, in response to the global shortage of cargo containers the costs associated with long-haul shipping have skyrocketed to as much as 10 times their normal rates. Other retailers are considering air freight, an option that is usually avoided because of its much higher cost. All of this could result in a less than optimal holiday buying season. In fact, some industry analysts are suggesting that retail shelves could be much emptier than usual and that those looking for specific items should do their shopping now. While many will welcome a holiday season that is focused less on consumption, for smaller retailers and others that rely on strong sales in December, the situation at the port in Long Beach could be devastating. Many retailers try to get their inventory in place by June in order to have catalog and online shopping options ready for holiday buyers. With shipments months behind schedule, some retailers are saying they will have to raise prices to cover higher shipping costs, others are trying to absorb the higher costs for now, but admit they have no idea what to expect over the few months, suggesting that the Grinch might come after all.
Discussion/Questions:
- Many retailers rely on holiday shopping for a significant share of their annual sales. Black Friday and Cyber Monday are usually target dates when retailers try to convince buyers to make their purchases and when buyers look for bargains. If retailers are unable to get their goods in stock, what happens to these traditional shopping days?
- How will the supply chain disruption affect your holiday shopping plans? If most Americans heed the warnings to do their holiday shopping early, how might their buying habits change? Discuss the implications of your response for global economic growth.
- What do the efforts by large retailers like Home Depot and Walmart suggest about the drawbacks of globalization? Is it still optimal to rely on global supply chains that involve production in low-cost locations like China and Vietnam? Should we expect to see large retailers move into cargo shipping on a permanent basis?
Sources: https://www.wsj.com/articles/germanys-christmas-king-gets-caught-up-in-shipping-chaos-11632475801; https://www.bbc.com/news/business-58479148; https://www.cnn.com/2021/09/20/business/christmas-tree-prices-2021/index.html. Photo by Kristina Paukshtite from Pexels.