Few symbols are as representative of the holiday season as a Christmas tree. Real or fake, traditional or ‘upside down’, Christmas trees represent the physical center of each family’s celebration and the focal point of displays in stores and in public squares.
But Christmas is also big business – over $1 Trillion was spent in 2016 – and Christmas trees are no exception. As it turns out, the economics that brought that balsam fir, douglas fir, or white pine into your living room mirrors many of the topics we discuss the other 11 months of the year in corporate procurement and supply chain.
Here are some of the economic realities of the Christmas tree supply chain you may not have been aware of:
Still Recovering from the 2008 Recession
The most popular types of Christmas trees require 7-10 years to reach the height most desired by consumers. As is true with other ‘perishable’ products in the supply chain, time is often the greatest obstacle to overcome. Look back 10 years from this holiday season, and you’re staring squarely at the 2008 recession. According to a recent article in the USA Today, “When the economy started tanking due to the Great Recession starting in 2008, Christmas tree sales dropped. Growers didn’t cut down as many trees as they normally would as demand slackened. That left less room in the groves to plant seedlings.” The shortage is leading to higher prices for trees that are not as tall or full as consumers expect. On the bright side, however, this year’s strong economy should mean better Christmas tree sales and more plantings, leading to a merry and affordable Christmas in 2026!
Managing the Impact of High Fuel Costs
The top five Christmas tree producing states are Oregon, North Carolina, Michigan, Pennsylvania, and Wisconsin. For the other 43 continental United States, that means shipping, which means fuel. According to AAA, diesel fuel prices are up $0.411 a gallon (or 17%) over this time last year. That additional cost has to be tacked on to the already higher prices of trees in 2017. According to the National Christmas Tree Association, the number one source of Christmas trees is chain stores like Walmart, Home Depot, etc.: 29% of all trees in 2016. Their low margins leave little room to absorb unexpectedly high fuel costs and end up becoming a pass-through cost for consumers.
The Surprising Trend of Online Shopping
No supply chain article would be complete without considering the impact of online shopping, and once again, Christmas trees don’t disappoint. The National Christmas Tree Association has tracked “anecdotal” evidence of online shopping for trees, approximately 3% as reported by consumers in 2016. While this is a small portion of the overall tree market (artificial trees represent 40% of the 46 Million trees purchased in 2016), corporate procurement professionals know better than to dismiss its potential for future growth. Some growers are already expanding their reach by moving into eCommerce. A Tree To Your Door, the brainchild of a 90 year old family farm based in Lake City, Michigan, will deliver a 7-8 foot cut to order tree to your door, with the help of FedEx and a stay fresh box. What will they think of next?
Closing thoughts
This Christmas, whether you are admiring the tree in your living room or taking a selfie in front of the 75-foot-tall Norway Spruce from State College, PA on display in Rockefeller Center, NYC, don’t forget to look past the lights, ornaments, and tradition to marvel at the economic and supply chain accomplishments necessary to make your holiday complete.
Merry Christmas!
Header photo: Kristina Posternak/shutterstock.com
