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Despite higher prices, retail sales rose a seasonally adjusted 0.7% in September 2021 from the month before, according to the U.S. Commerce Department. Given sales on the rise as they are, retailers would typically expect smooth sailing and increased profits for Q4, right? As we’ve witnessed the past 18 months, the only thing that’s been predictable is unpredictability. Though spending is up, businesses need to take caution for the remainder of 2021.
Economists have forecasted at least a 7% increase in holiday sales, but there are challenges that may prevent this sales strength to continue.1 There’s concern across all industries – electronics, clothing, sporting goods, and toys, — that shoppers may get deterred, given supply and demand issues as we head into the crucial holiday season. Not only will shippers need to focus on obtaining goods to sell, they will also need to ensure delivery through carrier management practices, such as a multi-carrier strategy.
Global Supply Chain Disruptions
The supply chain is responsible for receiving goods and materials that we need in our daily lives, whether for a household or a business. What started out as part of a strategy to mitigate the pandemic, modifications to the supply chain have now resulted in an imbalance of available products to meet the needs and demands of businesses and consumers. The current supply chain challenges are now affecting every aspect of our economy and critically impacting the ability to keep shelves stocked.
There are several factors contributing to the supply chain disruptions, including the declining workforce required to keep things moving. The Department of Labor reported 4.3 million Americans quit their jobs in August 2021 — the most since the agency started tracking this data in 2000. With an industry record of 490,000 warehouse job openings in July2, companies such as Walmart, Target and Amazon are putting their highest levels of effort into attracting new employees in time for the holiday season.2
This holiday season we could see shoppers spending more, but buying less. This is a result of inflation causing products to cost as much as 20% more than they did in 2020. Prices are climbing due to rising freight costs, higher wages, and increasing costs of raw materials. The current 12-month inflation rate is 5.4% and is expected to rise to 6.1% by the end of the year. This will be the highest rate of inflation since 1990.3
With these issues looming large ahead of the holidays, the Biden administration is making an effort to help alleviate the supply chain delays and congestion. It was announced that ports of Los Angeles and Long Beach, which act as the major ports of entry to the United States for 40% of containers received, would operate 24/7 to ease bottlenecks ahead of the holiday season. However, strengthening the supply chain and resolving fulfillment-related issues may take time well past 2021.
In the meantime, as we work towards a more stable economy, businesses need to be further strategic than ever with regards to increasing their bottom line and reducing costs. LJM Group can put tactics into place to help shippers save time and improve profitability. When focusing on parcel cost management and spend recovery, contact LJM to see how we can help you finish strong in Q4. Remember, we know what the Carriers don’t share with you.