Will something you want to sell (or buy) during the 2021 holiday season be out of stock because it’s stuck in a container ship languishing off the coast of California?
Inventory shortages caused by a broken global supply chain will plague the 2021 holiday season. As the crisis drags on, retailers, government officials and other experts agree the global trade system tangles will continue well into 2022—and possibly longer. This means retailers with the best logistical infrastructures—and the most clout with suppliers—could be poised to end the holiday season as big winners.
Outlook for holidays favors large retailers
Despite the chaos in supply chains, projections for holiday retail—especially online sales—are far from catastrophic.
After an unprecedented surge in digital holiday sales in 2020, U.S. consumer spending online is set to grow 12.1% year over year this 2021 holiday season, Digital Commerce 360 projects. Limited inventory, rising costs passed onto shoppers, and earlier holiday marketing in September and October will all work to temper gains during retail’s busiest time of year.
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Despite continuing supply-chain disruptions, NRF says total consumer holiday spending per household (online and offline) will be “on par with consumer spending last year.”
However, even if the holiday retail sales meet or exceed expectations, the wealth is unlikely to be distributed evenly. Large retailers had an edge in 2020, as online sales surged due to the COVID-19 pandemic. That was mainly due to the ability of giants like Amazon.com Inc. (No. 1 in the 2021 Digital Commerce 360 Top 1000) and Walmart Inc. (No. 2) to have inventory in stock when consumers needed it. The current supply chain debacle amplifies that advantage, says Brendan Witcher, vice president and principal analyst, digital business strategy at Forrester Research.
“Large retailers are coming into the season already at an advantage since many consumers shifted to shopping with the ‘aggregators’ of retail Amazon, Walmart, Target, etc.—over the last 18 months,” Witcher says. “Supply chain issues compound the advantage since larger retailers can utilize multiple sources for products to fill demand gaps and retain consumers’ business through the end of the year.”
Problems like the massive backups at U.S. ports, a global semiconductor chip shortage and a nationwide scarcity of truck drivers are negatively affecting many retailers and brands. A good example is Turtle Beach Corp. (No. 445), a consumer brand manufacturer of gaming accessories and audio equipment.
On a conference call with analysts to discuss Q3 earnings, Turtle Beach CEO Juergen Stark said the semiconductor shortages and shipping delays would constrain its revenue by $25 million to $30 million this year.
Despite that, the company reported net revenue of $85.3 million. That, Turtle Beach says, was its second-best third quarter ever, and actually a decrease compared with its best-quarter ever in Q3 2020, when revenue grew 141% year over year to reach a record $112.5 million.
“We expect the supply chain headwinds to abate during 2022, particularly as we complete several additional programs to engineer away from highly constrained semiconductors to semiconductors with better supply,” Stark said during the conference call, according to a Seeking Alpha transcript. A company spokesman declined to provide further comment.
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