What happens when the products finally arrive?
- The chaos of the supply chain has left many items stranded, so they may arrive too late for the holidays.
- But eventually everything will reach its destination, and then what?
- Experts say retailers will either have to package and store or sell products for up to 50% off.
You’ve probably heard that a lot of products are stranded on container ships and stacked on docks, or stranded somewhere in the global supply chain.
But it all – seasonal decor, clothes, toys, and so many other types of delayed products – must eventually get to its final destination. So what happens when it does?
The short answer: a significant glut that will leave retailers with a choice that could be “very lucrative” for consumers, experts say.
What is the state of the supply chain?
The supply chain crisis has led to supply issues, from artificial Christmas trees to game consoles this holiday season. As a result, retailers have urged consumers to step up on their holiday shopping long before
to make sure they will be able to grab the freebies they want. Experts also intervened, warning of fewer offers and a worse selection than in previous years.
But according to Mark Cohen, director of retail studies at Columbia University, the situation may not be as bad as retailers had anticipated – “the shelves are not tragically bare,” he said. he told Insider.
“Little Johnny and Mary are going to find something under the tree eventually,” he said. “It might not be exactly the video game their parents intended for them, but they won’t be without it.”
How late are the products at this time?
While supply chains were initially disrupted in the spring of 2020 when the coronavirus pandemic closed factories, think back to what has happened in the past three months alone: September’s orders got stuck on the doorstep. -containers; October orders followed just as September orders finally arrived at US port docks; then November orders were shipped as September orders moved from docks to warehouses and October orders made it ashore.
Does this sound confusing? Think about what this means for the holiday season and beyond: Retailers are going to go from a lack of product to a significant overstock of product, Marshal Cohen, Chief
adviser to market research firm NPD Group, Insider said.
“This is what I call the seismic supply shift,” he said. “All of a sudden you’re going to have three months of product that you’re going to try to sell over a six week period.”
Some Halloween merchandise has just arrived at US ports, which means a lot of Christmas merchandise has certainly not reached its intended location yet. But holiday items are perishable in a way – once the season ends after Christmas, consumers lose a lot of interest in things like chunky sweaters.
So what are retailers going to do with all of this?
Retailers have basically two options: pack everything and store it in a warehouse until next year, or sell it at a loss.
The pack-and-hold method has grown in popularity because it gives retailers a second chance to sell an item at full price. Gap said in November that the packaging and preservation method it used in 2020 for its spring and summer lines is a “good strategy” that will likely be used again this holiday season.
Other retailers, like Calvin Klein’s parent company PVH, have also tested this method.
For fairly standard items that are in demand every holiday season, like a black beanie or insulated gloves, this strategy makes sense. For a retailer that sells a wide range of commodities, like Gap, pack-and-hold can make sense.
But there are downsides to this strategy. For one thing, popular styles and colors change from year to year, and a retailer may not be able to sell some 2021 products in 2022. Additionally, the company has already paid for a product they no longer manufactures as other costs accumulate. . On top of that, they’ll have to pay someone to repackage everything, transport it, and for warehouse space to store it.
The other option is the discount.
Retailers who receive late merchandise will be forced to “clean up their decks” to make room for spring merchandise, Columbia’s Cohen said, but that means they’ll have to sell those products at a “pretty heroic” discount. .
What type of discount are we talking about?
Columbia’s Cohen said buyers should expect to see excess inventory of certain products – especially items in demand year round – rather than deep discounts.
But those “perishable” categories will be sharply reduced, said Cohen of NPD Group – items like fashion and “COVID lifestyle” products that people only needed to buy once, like a new one. toaster oven. Those discounts will start to hit now, he predicted.
“As we approach the vacation, or get to the other side of the vacation, you’re going to start to see 50% off,” he said. “It could be a very lucrative month of January and February for the consumer.”