Pandemic, supply chain issues will make this Christmas different
Some basic tips can make things go smoother
LEXINGTON, Ky. (UK Public Relations) — The saying goes, “it’s the most wonderful time of the year,” but massive supply chain disruptions are leaving shelves empty and raising prices for what’s in stock.
Then, there are the truck transport shortages. Shipping delays may leave shoppers empty-handed this holiday season.
This time of year, the economy also relies heavily on consumer spending. According to the National Retail Federation, holiday sales represent about 20% of annual U.S. retail sales.
To help buyers make the most of the holiday shopping season, UKNow enlisted the expertise of Carol Chavez and Corinne Hassler in the Gatton College of Business and Economics at the University of Kentucky.
Chavez is a lecturer in the Department of Marketing and Supply Chain and Hassler is an assistant professor in the same department. In the Q&A session below, they offer strategies to help reduce your stress and save this shopping season.
UKNow: This holiday season, shoppers have heard a lot about disruptions in the supply chain. What exactly does that mean?
Chavez: A supply chain is simply the chain of business through which products move from the raw materials needed to make the product to manufacturing of the product, and finally, selling of the product to a consumer. There are many “links” in the chain. A manufacturing company located in China might purchase components from Thailand, and the product is ultimately sold in the U.S. The components must travel from Thailand to China via truck or rail that must pass through at least one other country to get to China. Once the product is manufactured in China it must travel via truck or rail to a seaport and get loaded on a ship. That ship will sail across the Pacific to the U.S. where it will arrive at a seaport in southern California. It must be unloaded and travel to a distribution center. From the distribution center, it will travel by truck, and possibly plane, to get to a retail store or your front porch. Any “link” in this chain can fail. Today, there are shortages of raw materials, congestion in the seaports, shortages of truck drivers, etc. The combination of these weak and broken links in the supply chain are called disruptions, and there are many supply chain disruptions occurring right now.
UKNow: How will the supply chain affect holiday sales? Can shoppers still expect deals, or should they be prepared to spend more this year?
Chavez: Expect higher prices and fewer options. The reality is that supplies of many raw materials and component parts continue to be constrained to include rubber, aluminum and semi-conductor chips. These shortages combined with shipping port congestion and shortage of truck drivers are driving prices up across the board. It costs five times as much for companies to ship containers of goods from overseas versus a year ago. Ultimately, large companies are absorbing as much of that increase as possible, but some of that cost will certainly be passed along to consumers.
UKNow: Should consumers be shopping earlier, even online? What can shoppers expect when it comes to shipping delays?
Chavez: From a supply chain perspective, I recommend that consumers prepare for the holidays earlier than ever. If you are ordering items online, pay particular attention to where your items are coming from and if they are in stock. Expect much longer than typical lead times for anything that is shipped from outside the U.S.
UKNow: What can consumers do, if anything, to ensure timely arrival of purchases this holiday season?
Hassler: There are a couple tactics consumers can leverage to improve their chances of on-time purchases. The most important would be to shop as early as possible, to compensate for potential delays. Consumers might also consider shopping with larger retailers (e.g., Walmart, Best Buy, Amazon, etc.). Because of their scale of operation, these businesses may be better equipped to handle such delays/disruptions. I would also recommend doing some online research ahead of time — pinpointing the stores that have your items in stock and purchasing in-person if possible. For those out-of-stock items, set email reminders for when they’ve been restocked.
UKNow: Black Friday is a tradition for many families. What can we expect it to look like as the pandemic continues and labor shortages persist?
Hassler: This will be another year of adaptation — another year of learning how to best live our lives amid a pandemic, and more specifically, how to best check off our holiday shopping list in a way that is fun, but safe. Though it will not be as restrictive as 2020, there will still be a need for flexibility.
One key component to this flexibility is a sustained reliability on online shopping. Online shopping will be as pertinent as ever as COVID lives on, variants have developed and breakthrough cases create new concerns. Still, it’s evident this year consumers are itching to get back to “normal.” I suspect this will result in much more foot traffic than 2020. Potential tensions could rise from increased crowds and differing opinions regarding safety precautions (e.g., wearing a mask versus not).
On a more positive note, this year there seems to be even more excitement around the holidays. Overall, life feels a little less bleak than in 2020; we are better equipped to live in a pandemic this year compared to last. With improved understanding of the virus and the distribution of the vaccine, people are feeling more comfortable than they did in 2020. This increased excitement has already manifested itself in an increase in planned spending. However, this may be at odds with retailers increased operational costs, causing them to potentially offer fewer doorbuster deals and less variety of items.
UKNow: All of this being said, can Black Friday and Cyber Monday still be an effective way to save on holiday shopping?
Consumers need to develop a “game plan” ahead of time. Write out what they need, where it’s offered and cost-compare online before the sales hit, and it’s time to implement the shopping plan. It’s important to stick to your list as well, otherwise consumers can be easily susceptible to marketing tactics and environmental (in-store) cues meant to encourage them to impulse shop.
Chavez: There will still be deals on Black Friday, but they will not look as good as deals in years past. The deals will be discounted from higher prices. The discounted price this year could be like the regular price paid two years ago. As for Cyber Monday, be very aware of estimated delivery dates before you finalize payment. If it is important to receive your purchase by a specific date, Cyber Monday may not be your best choice. Conversely, the online industry is aware of this and may offer more incentives to purchase online. I agree with Professor Hassler, the bottom line is, be flexible.
UKNOW: It’s easy to get caught up in the holiday spirit and overspend. Do you have any tips for staying within budget?
Hassler: Again, preparation is key. Mentally keeping track of your shopping is often ineffective and costly. Most consumers are not great mental accountants. It can be easy to underestimate what they’ve spent in store, especially when using a credit card.
Consumer research tells us that spending on a card is less psychologically painful than spending with cash, and thus the loss of that money is far less salient, making it more challenging to keep track of spending. Moreover, the loss of that money is delayed, and not taken from the consumer’s wallet immediately, also increasing the difficulty of such mental accounting. Retailer pricing doesn’t help either. Consumers are known to imprint on the first number in a pricing sequence. So, if a product is priced at $19.99, many consumers mentally account for this item as costing $19, although it is realistically about $20. This doesn’t seem like a huge deal for smaller amounts, but this inadequate mental accounting certainly adds up for larger amounts. For instance, assuming $199 is closer to $100 than $200 can easily throw a budget off track.
A final shopping tip: Be aware that, often the items you seek (e.g., doorbusters) are intentionally placed near the back of store to force consumers to venture through the entire retail space. Retailers hope this tactic will entice consumers to purchase items not necessarily on their shopping list.
UKNow: The COVID-19 pandemic has instilled new behaviors in shoppers — who are spending more time and money online — is this a trend that could become permanent?
Hassler: Most certainly. Online shopping was already gaining traction pre-pandemic, but now it has become even more normalized. Particularly because it was the only shopping modality available for so many months. In an effort to adapt to our new way of life, many retailers have even adopted a hybrid model of shopping — combining norms of pre-pandemic life and current pandemic life. For example, despite normal operations back up and running for many retailers, they still offer an online delivery/curbside pick-up option. They too have been conditioned to this “new normal.”
UKNow: Are there any last pieces of advice you would like to add?
Hassler: Two final notes: 1) I would caution consumers to be aware of reference pricing when attempting to stay in their budgets or get a deal this holiday season. Although a product may be listed “on sale,” in reality they can be priced at the retailer’s ideal value, and simply labeled “on sale” to draw the consumer in. In other words, not all sales are created equal. 2) Retailers know consumers love a deal and leverage this insight to influence consumers to purchase things they normally would not. So, when you are presented with a “deal” not on your shopping list, check in with yourself and ask: Is this something I truly want/need? Is it truly a deal (i.e., a real discount)? Or is it simply framed as one to draw me in at the prospect of a getting deal?
Chavez: Don’t make promises, be flexible and return to basics. We promised our son the new Xbox for Christmas in 2020 and remain unsuccessful to this day in fulfilling that promise. It may be a good time to start new traditions with homemade gifts. That is what my family plans to do, and I’m truly excited for it!