Peak to Last from October to January? Will enough Goods make it to Store Shelves?

The good news: Various pundits are pretty bullish on this year’s holiday retail sales.

For example, last week, analysts at investment firm Bain predicted year-over-year growth in retail sales of 7% in November and December. Meanwhile, Deloitte sees holiday retail sales climbing 7% to 9%, better than the 5.8% increase it says was seen in 2020. And a forecast by Mastercard SpendingPulse said holiday retail sales should rise 7.4% versus 2020, fueled by a rebound in in-store shopping and strong consumer demand.

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But a key issue impacting the accuracy all these forecasts is this: will retail inventories be on the shelf to support the potential sales, given the sourcing and shipping backlogs? For example, the CEO of toy brand company MGA Entertainment had anticipated 50% sales growth this year but now expects an increase of 18% to 20% due to lower inventories.

And the realities of all these supply chain disruptions means the length and character of peak season 2021 are likely to be very different than perhaps anything experienced in the past.

With the shipping and supply woes manifesting themselves early in 2021, many retailers and brand companies brought in merchandise especially early this year, starting in May and June. And for some of these companies, getting the goods to the US means they wanted to start selling them before the traditional Christmas shopping season kick off on Black Friday, the day after the Thanksgiving holiday in late November.

As reported by the UK’s Financial Times last week, retailer Lowe’s made “a very strategic decision” to bring in products earlier this year, CFO David Denton said at an analyst meeting last month. He indicated that the choice was paying off. After a fast start to Halloween, Christmas purchases were also “coming in earlier than we originally planned,” he said.

The FT also wrote that Levi’s CFO Harmit Singh told the paper that its holiday sales had already commenced, indicating a strong but unusually extended holiday season.

That sentiment was shared by Joel Bines, co-head of consulting firm AlixPartners’ retail practice, who told the Financial Time that he believes “Black Friday doesn’t exist; the holiday season doesn’t exist, not as it used to. It’s essentially October 1 to January 15.”

That’s the way Amazon is thinking too. Last week, it Amazon announced that “the holidays have officially begun”, and that is was promoting “Black Friday-worthy” deals eight weeks before Black Friday and 11 days earlier than it began its price promotions in 2020.

Such big promotions may be needed to change when the majority of consumers start buying in 2021, though there have certainly been plenty of news stories saying finding some goods will be a challenge this year. One recent study from Accenture found about one-third of US consumers were planning to shop earlier this season.

For some retailers and brands, getting shelves stocked is going to be a real challenge, extended holiday season or not.

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Significant delays in ocean shipping cycles remain a huge issue. Last week, Marcus Carmont of supply chain consulting firm TMX Global, commented that “If it wasn’t on the water four weeks ago, it’s not going to be here for Christmas. The get-out-of-jail card to use a plane is not really a lever you can pull.”

This year, the normal premium of air shipping goods in from Asia has spiked, with air freight costs up about 200% over the past year, making it prohibitively expensive for most companies.

While there will be many goods on store shelves this year, “there will definitely be weeping children this holiday season” Pines told the FT.

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