Supply Chain Problems May Foil Your Holiday Shopping Plans
Covid-19 has disrupted supply chains for the past year and a half. We’ve seen shortages of our favorite things, from ketchup to coffee—but many people hoped that with vaccinations and the world reopening, those woes were behind us.
The Delta variant has other plans that could upend the holiday shopping season.
Countries at the heart of retail manufacturing, such as Vietnam and Indonesia, are being swept away by surges of the highly transmissible Delta variant of the Covid-19 virus. Popular clothing and shoe brands with factories in these countries, including Nike and Gap, are scrambling to find alternative solutions.
These supply-chain problems are piling on top of other issues that have caused disruption for most of the pandemic. Combined, they’re predicted to cause further headaches for retailers and shoppers alike.
Here’s what shoppers should know—and why you might want to start holiday shopping earlier this year.
Why Retail Manufacturing is Disrupted
Vietnam’s initial defense against the virus has been described as “one of the world’s most successful,” but the country is now battling the Delta variant. Factories are being forced to shut down or drastically reduce the number of workers on-site each day. Indonesia is experiencing a similar reality—which means the retail supply chain is on its way to further severe delays.
The surge will be detrimental to the retail industry, which has moved much of its manufacturing to Southeast Asian countries in recent years. Much of this growth is due to companies shifting manufacturing out of China due to rising costs and effects of the ongoing U.S.-China trade war. Vietnam, for example, is now the second-largest supplier of shoes and apparel to the United States, behind China.
As these countries become inundated with infections, the retail industry’s reliance on them is being choked. Brands are now scrambling to outsource their manufacturing elsewhere, as reported by the Wall Street Journal, but it comes at a cost.
According to the Wall Street Journal, Adidas estimates a loss of $600 million in sales for the second portion of the year due to hurt supply and is looking to raise prices of its products to minimize the burn.
Nick Vyas, executive director and co-founder of the University of Southern California Marshall’s Center for Global Supply Chain Management, says markets are already seeing upward pressure on prices from retailers as they struggle to cope with increased labor and transportation costs.
He says it’s not a question of when consumers will bear the consequences—it’s a question of for how long.
“We are in this battle of the Delta variant and others, and I feel like at minimum we are going to be struggling for at least 12, if not 18 months before supply chains get back to the state of equilibrium,” says Vyas.
Retailers are already sounding alarms about their inability to keep up with demand due to other supply chain issues, including raw material and shipping container shortages. But around this time of the year, companies are gearing up for the busy holiday season.
For some stores, it remains unclear whether they’ll obtain the orders needed at fair prices; some are reporting transportation costs are increasing exponentially on top of manufacturing costs.
That’s why getting a head start on holiday shopping could require buying items before prices really jump, or before retailers run out of stock.
“Shopping in December is going to be really risky this year, not just because of delays in getting your stuff, but because of retailers’ ability to restock throughout December,” says Kristen McGrath, shopping expert at RetailMeNot. “Stuff that sells out early might not come back in stock in time for you to buy it for the holidays.”
Vaccine Inequality a Threat to Recovery
Vaccine inequality—the term to describe the unequal distribution of vaccines worldwide—is becoming a serious threat to the global economy and individual aspects of each nation’s reliance upon it.
As vaccinations have become available for Covid-19, mass vaccination campaigns have taken off in wealthy, mostly Western countries. Lower-developed countries, including Vietnam, have struggled to obtain and administer vaccinations.
Vietnam’s slow vaccination campaign means it could take weeks—or months—to see the Delta surge subside. As of August 23, only 1.97% of its population had received both doses of the vaccine, and only 14.18% received at least one dose, according to Our World in Data.
The situation has gotten so dire in Vietnam that the American Apparel & Footwear Association, which has hundreds of member brands, wrote a letter to President Biden asking him to donate more vaccines to the country.
And while increasing vaccinations in these manufacturing countries is key to helping them recover, it’s not enough to fix all of the supply chain issues, Vyas says. He says there must be a well-rounded approach to improving structural faults in the supply chain, including being country-specific.
And in terms of lessons learned from this pandemic, Vyas’ take is simple.
“This global pandemic should’ve been looked at as a global pandemic,” Vyas says. “Our approach from the get-go should have been, how do we really address these issues—access to vaccination, herd immunity—not just in our country, but across the globe?”