In 2020, we experienced the impact of the global pandemic on holiday shopping and shipping trends. We saw a record number of consumers turning to e-commerce due to safety concerns and stay-at-home orders as we braced for the onset of “shipageddon,” a potential shipping crisis involving port congestion, labor shortages, and a chaotic retail supply chain.
As we look back at the 2020 holiday season, it was merely a precursor to what we are facing in the remaining months of 2021. The threat of shipageddon became a reality as backed-up ports and labor and material shortages have rocked the supply chain.
Below, we explain some of these issues and how they will impact consumers this holiday season.
Supply is low for just about anything that needs producing or manufacturing, so consumers will notice more empty shelves and out-of-stock items than usual.
- Because ports are gridlocked, companies can’t access shipping containers to load and unload their goods, which means they can’t restock their inventory to meet rising demands. (Source)
- Factories are shutting down or reducing production due to labor and raw material shortages, so companies can’t replenish their products. (Source)
- In August 2021, companies were already facing low inventory. Out-of-stock products were up 172% compared to January 2020, prior to the news of Covid-19’s spread across the US. (Source)
Companies are adjusting their rates to accommodate inflation, rising shipping costs, and hefty fuel prices. Therefore, consumers can expect to see higher price tags this holiday season.
- Demand is up, and supply is down; a recipe for inflation. The annual rate of inflation is up 6.2% this October compared to last October, resulting in higher consumer prices. (Source)
- To keep up with the supply chain chaos, the cost of shipping containers is up 500% to 800% in some cases, making it extremely expensive for some companies to use ocean transport. (Source)
- Shipping containers have become scarce while shipping demand continues to surge. The result? A rise in shipping costs that’s making companies raise their prices in response. Pre-pandemic, it cost roughly $2,000 to ship a container from Shanghai to Los Angeles. In early 2021, that same journey cost $25,000. (Source)
- Since the beginning of 2021, gas prices have increased by an average of 35% (Source). This surge in fuel pricing is another factor causing companies to increase their consumer prices to cover shipping and transportation costs. (Source)
Because shipping delays are rampant, consumers will wait longer to receive their goods.
- Due to labor shortages and pandemic protocols, clogged ports mean companies aren’t receiving their raw materials and goods on time. (Source)
- The U.S. Postal Service has implemented new standards, lengthening the delivery time of 30% of their volume. (Source)
- In August, nearly 4.3 million Americans quit their jobs, including many warehouse workers and truck drivers responsible for delivering goods. Without the necessary hands-on deck, goods and raw materials are left in a holding pattern. (Source)
How Is This Impacting Consumer Behavior?
The supply chain drama is causing ripples left and right. Consumers can expect to see low inventory, higher prices, and slower delivery times this holiday season. With that said, this is how some consumers are responding:
- Gone are the days of last-minute shopping—at least this holiday season. A recent poll revealed 45% of respondents had started their holiday shopping in early October. (Source)
- Shoppers aren’t slowing down despite higher prices. Deloitte’s annual holiday retail forecast predicts holiday spending to increase 7% to 9% this year. That’s a projected $1.23 trillion to $1.3 trillion in sales between November and January. (Source)
- The year 2020 saw a surge in online shopping, and consumers are expected to continue this trend. Holiday e-commerce sales are estimated to rise 11% to 15% this year. (Source)
- There was a huge focus on e-commerce last year, but as COVID-19 restrictions ease, consumers are expected to do a combination of online shopping, in-store shopping, and curbside pick-up in 2021. (Source)
Because of the unusual factors surrounding this holiday season, the shipping industry sees itself in somewhat of an unpredictable circumstance. Are you prepared for this unique holiday season? Contact Falvey Cargo with any questions.