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The US retail sector is facing a supply chain nightmare before Christmas! A myriad of disruptions is threatening to derail retailers’ prospects and push hundreds of thousands of businesses over the edge. The latest data is doing little to calm nerves amongst industry executives. Estimates show that due to worsening port congestion, if goods aren’t off a boat by now, it’s highly unlikely that they’ll make it onto store shelves before the beginning of the holiday season, which may result in significantly lower profits for retailers and small businesses in the most important shopping season of the year.
The complex logistics of unloading the ships and getting their containers onto trucks that will drive them to warehouses and stores across the country means that all of the goods that are still stuck at ports won’t make it to store shelves by the end of the year. Therefore, hundreds of thousands of Christmas gifts will arrive too late for the holidays, but that doesn’t mean the price of those delayed goods will be any lower when they’re finally on the reach of consumers. Prices will continue to rise in the near future. In fact, as of now, with Black Friday and Cyber Monday fast approaching, 70% of US retailers are warning that there will be fewer deals for shoppers by as much as 75%.
Higher shipping costs are also weighing on that equation. According to a new study released by the UN, soaring shipping prices can hike the prices of consumer goods by over 10% in 2022. Most big US retailers, such as Walmart and Target, are already struggling to ensure inventory amid the growing supply chain chaos. Executives of the industry are extremely nervous about the logistical challenges threatening the very existence of some smaller businesses that just got past the worst effects of the recession. Over the past twelve months, the cost of shipping a container from Asia to the U.S. West Coast climbed over 500%.
Experts specialized in troubled companies are warning that another massive wave of bankruptcies is looming given that financially impaired businesses are likely to experience more hardships than those that have the capacity to hire more warehouse workers, or even charter their own ship, to cope with the turbulence. And as the most important shopping season of the year approaches, this is a make-or-break time for retailers.
This year, the survival of hundreds of thousands more companies is still on the line, according to bankruptcy professionals who have been helping overly indebted businesses to reduce their balance sheet to live to fight another day. In a recent Bloomberg piece, they said that the current supply chain challenges mean that many of these companies will be gone over the next 18 to 24 months.
And, unfortunately, a new analysis published by the spend management specialist, Coupa, is making everyone in the sector even more nervous. The study found that US retailers must brace for revenue losses as high as 20 percent due to worsening supply chain issues. Over the past 18 months, retailers already recorded $68 billion in losses. Now, at least two-thirds, or nearly 63 percent, of retailers are concerned that the current disruptions will hit Christmas revenues and generate more painful losses ahead.
Some of the drop in revenue is happening because inventory remains unavailable, but thousands of products never make it to the stores or warehouses because they get stolen at ports. Delivery delays are actually giving thieves opportunities to steal from containers. “Thieves are targeting electronics and household goods,” according to CargoNet, which tracks supply chain thefts.
From January to September this year, roughly $45 million in cargo thefts were reported. In 2020, over $68 million worth of goods were stolen. As winter approaches and surveillance becomes more sparse, CargoNet said it expects theft to remain elevated into the final quarter of this year and into early 2022.
So you should prepare accordingly because the shortages and price increases we’ve experienced so far are just a hint of the devastating crisis we will be facing this winter. When it comes to 2022, you should prepare for the worst before things spin out of control, especially when considering that our economy and essentially all of our other important systems are falling apart all around us. Things are only going to get harder from this point forward, and our society is about to the crushed by a crisis most people are totally unprepared for.
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