Supply chain disruptions force retailers to stock up early for the holidays

Dan Marshall is hoping he has enough stacks of board games and toy truck rides stored at his family’s toy store in St. Paul to last the holiday season.
Yet unprecedented supply chain disruptions, including congested ports and a lack of trucks and warehouse workers, could mean that its toy store Mischief could run out of popular gifts, a risk that retailers, large and small, will be faced in the coming months.
Big retailers like Minneapolis-based Target have started taking drastic steps to fill customers’ vacation shopping lists, like chartering their own international freighters, dramatically increasing inventory, and hiring thousands more employees to help. to keep shelves fully stocked.
“The wild changes in the buying habits of consumers themselves and the item selections have really thrown traditional demand planning out the window,” said Noah Hoffman, vice president of ground transportation in North America for CH Robinson, based in Eden Prairie, one of the largest companies in the world.
After a year of forced transformation as COVID-19 changed the way people shop, retailers are facing yet another holiday season this year where they will likely have to pivot quickly or lose. The result could cause consumers to buy earlier, buy locally, or re-evaluate what makes the best gift.
Target retailers in Mischief have filled warehouses or storage rooms to anticipate what consumers will buy.
“We’re just trying to find places to put everything away,” Marshall said, looking at the toy shelves on the lower level of the Grand Avenue store he co-owns with his wife and daughter. “It’s crazy, but we think we’re doing the right thing by trying to get things done sooner.”
Already, there are some hard-to-keep items like Japanese flavored sodas, some candy, and Pokémon cards. The gift wrapping paper is weak. And the store heard books are going to be hard to find soon, Marshall said.
Target and Best Buy have also sourced. At the end of July, Target had more than 26% more inventory, or nearly $ 2.5 billion in merchandise, compared to 2020. Richfield-based Best Buy said it had 55% more merchandise than it did in 2020. at the same period the previous year. , and 23% more than in 2019.
“For consumers who want to have an eye on freebies, shopping earlier, I think, is going to be helpful,” said Carlos Castelán, managing director of local retail consultancy Navio Group.
Usually, retailers are unlikely to have a ton of inventory on their balance sheet that they might not be able to sell, Castelán said. This holiday season is an exception.
“In this case, the paradigm has been reversed and it’s actually riskier to potentially miss sales targets if you don’t have that inventory on hand up front,” Castelán said. “I think it’s a dramatic change.”
Best Buy CEO Corie Barry acknowledged during an earnings call in August that congested ports and transportation disruption will continue to present challenges. She said the company responded by “purchasing additional transportation, increasing the flow of product and adjusting the assortment of stores based on availability.”
Target announced last month that it has chartered its own container ship to regularly move its cargo from overseas ports to the United States. Other retailers such as Walmart, Home Depot, and Costco are doing the same.
Last week, Target announced it would add 30,000 new positions to its supply chain facilities nationwide, with around 1,000 of those hires for distribution centers in the Twin Cities.
As supply chain problems continue to worsen, the country is quickly approaching the holidays. According to Deloitte’s annual holiday retail forecast released in September, holiday retail sales are expected to increase 7% to 9% in 2021 compared to last year. Target has set its first early holiday sales for mid-October.
Supply chain issues date back at least to the onset of the international coronavirus pandemic. As the world temporarily halted to slow the spread of COVID-19, consumer needs have changed, as have shipping methods. There have also been manufacturing shutdowns, including recently in China due to power outages but also due to COVID-19 outbreaks or border restrictions over the past year and a half.
A bottleneck quickly formed as retailers tried to meet pent-up demand and economies started to operate at full capacity again, with consumers expecting fast online delivery, CH Robinson’s Hoffman said.
Retailers, seeing wait times increasing, began to increase their inventory to compensate, he said.
As a result, dozens of container ships – and thousands of containers – wait at ports in Los Angeles and Long Beach, Calif., According to the Washington Post. This month, the median cost of shipping a standard rectangular metal container from China to the west coast of the United States hit a record $ 20,586, almost double what it cost in July. , or double what it cost in January, according to the Freightos index. .
According to a recent National Retail Federation survey, 98% of retailers said they were affected by delays in ports and shipments.
All of these considerations are in addition to changes that will take effect this month that would increase the delivery time of certain First Class mail delivered by the U.S. Postal Service and increase prices for the holiday season for domestic commercial parcels and Retail.
While many consumer prices have yet to be increased, increased transportation costs for retailers will eventually trickle down to customers, said Patrick Sedlak, director of Sedlak Supply Chain Consultants, headquartered in in Cleveland.
“There will be no short-term solution to the supply chain challenges facing the world or any specific industry,” Sedlak said.
For Kingshuk Sinha, chairman of the supply chain and operations department at the Carlson School of Management at the University of Minnesota, there’s not much that even a large retailer can cope with with disruptions like COVID-19 and natural disasters.
A more pragmatic solution would be for consumers to rethink the type and number of gifts they buy and buy locally produced items so that there are less worries about shipping delays and availability, he said. declared.
Legacy Toys – which has seven stores, including stores at the Mall of America and the Galleria – began ordering inventory for this holiday season in early January, owner Brad Ruoho said.
In February, Ruoho purchased a 15,000 square foot warehouse in Eden Prairie to cope with the influx of online orders. As mainstream mail carriers became more expensive, Ruoho also purchased vehicles for his store to deliver its own packages to the Twin Cities by the holidays.
Business is booming, he said. The store is already running out of popular toys and had to revamp hot items.
“So many things that we bought in advance for Christmas are long gone,” he said. “It’s a good problem to have, but it’s still a problem.”