Retailers ask where's my stuff?
Consumers out of luck at some retail stores and websites during the holiday season
Unlike the 2020 holiday season in which the pain was in the last mile, the pain in the 2021 holiday season was further upstream in the supply chain.
Many retailers’ inventory ear-marked for the holiday season sat on a ship, in a container waiting to be picked up, or was snapped up quickly by consumers ahead of the 2021 holiday season.
As such, the latest batch of retailers’ quarterly earnings announcements will likely include commentary on their supply chain struggles for the final quarter of 2021.
Abercrombie set expectations early, prior to its Q4 earnings announcement in March, by issuing guidance in early January for the full year- 2021 and Q4.
“...We experienced unexpected inventory receipt slides...due to extended port & transportation delays. As a result, we did not have enough inventory to keep pace with customer demand, resulting in lost sales during the peak holiday selling period,” CEO Fran Horowitz said in the statement.
As did UK-based ASOS:
“Significant port congestion and supply chain disruption inhibited our ability to fully service demand” in the US,” according to its Jan 13 statement.
Meanwhile, Bed, Bath & Beyond reported their fiscal Q3 earnings on Jan 6 for the period ending Nov 30.
“The customer experience was compromised as strong demand wasn’t made with strong product availability. This resulted in approximately $100 million in lost failed the demand, or a mid-single-digit impact of the quarter and an even higher impact on December,” Bed, Bath & Beyond CEO Mark Tritton told analysts.
Despite retail inventory woes, sales were healthy throughout 2021, rising 17.9% from 2020, seasonally unadjusted, according to US Census data. However, some retailers’ inventories struggled to keep with sales. As a result, the inventory/sales ratio took a dip in November (latest inventory data) to 1.11 compared to 1.13 in October and 1.30 from November 2020.
The pain of being in the middle
We’ll likely hear of holiday season inventory struggles from mid-sized retailers during their earnings calls over the next few months. Larger ones such as Walmart, Target, and Costco probably did not struggle as much due to such measures as chartering ocean vessels, the right supply chain investments early on, and perhaps having more pull with supply chain partners thanks to their import volumes.
More mid-sized retailers are investing more in their supply chains. One of the most notable ones has been AEO’s logistics acquisitions earlier in 2021.
Bed, Bath & Beyond’s bumps and bruises is a classic example of a retailer investing in transforming what it describes as a ‘legacy supply chain’ to a more nimble, agile one in an environment that’s quite volatile.
“Our number one priority is to continue to change our current systems and processes to unlock inventory in a faster and more efficient way to meet demand, above and beyond our mid to long-term investments. To improve our top in-stock positions, we are working with our vendors to target constrained inventory and improve the flow of RDCs (regional distribution centers) and stores,” Mark Tritton, CEO, told analysts. “Concurrently, we must enhance our ability to fulfill our store demand once inventory is within our position from shipping containers to warehouses to stores. In the near-term, we’ve created new transfer processes that increase third-party logistics capacity and decrease warehouse holds to assist with the flow,” Tritton said.
According to a survey of mid-sized US companies from JP Morgan - Chase, 65% surveyed noted they plan to increase strategic stockpiling, and 51% surveyed were adding suppliers from new geographies.
Stockpiling and adding suppliers will be costly supply chain investments for retailers, requiring extra storage space for the additional inventory and maybe higher transportation/inbound costs for additional suppliers. However, the JP Morgan - Chase survey noted that 48% of respondents stated that they were allocating more funds to move goods.
Why do all of this investing? Despite the supply chain pains experienced by a number of mid-sized retailers, seven out of ten said their company profits have returned to or exceeded pre-pandemic levels, according to the JP Morgan-Chase survey.
- Cathy
P.S. I’m venturing out to a few conferences this quarter so if you are too, let me know!
January 24-26 - SMC3 Jumpstart - I’ll be speaking Tuesday during the Reshaping Final Mile and Reverse Logistics session.
February 7-8 - Reverse Logistics Association Conference
February 20-22 - World Mail and Express Americas Conference - I’ll be chairing the session, Navigating Global Taxation and Customs Policies.
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I wear a number of hats these days. Besides running a logistics market research firm, catch my weekly articles on air cargo, freight forwarding, and the express markets, as well as a monthly podcast on Air Cargo World, I’m also trying to figure out how to measure returns for the Reverse Logistics Association, I assist companies with content and other needs and I’m trying to figure out how to update my website (which is down at the moment).