Logistics Hot Mess Has Retailers Facing Grim Holiday Season

The problems besetting the worldwide supply chain of consumer goods might intensify during the second half of this year as the coronavirus re-emerges, putting a strong headwind in the face of retail sales during the holiday season, according to a report by investment banking firm Raymond James.

The pandemic posed problems for international logistics before, but the emergence of the delta variant of the coronavirus comes at a particularly bad time, since retailers need to have their holiday inventories on the way now. A number of bottlenecks are currently emerging to disrupt the flow of goods.

Those include factory shutdowns in Vietnam and Thailand, and as Covid-19 cases increase, there are reports of shutdowns in China, by far the largest supplier of consumer goods to North American markets. There is also a shortage of shipping containers and space on ships to bring them across the oceans.

“Once [nations such as Vietnam and Thailand] get their populations fully vaccinated, it should no longer be an issue, but that’s very unlikely to happen before Christmas,” Raymond James institutional equity strategist Tavis McCourt told Money.

The holiday season squeeze is part of a costly road ahead for U.S. retailers. The industry will face an extra $223B in costs of goods sold this holiday season, Salesforce predicts, which include higher costs for freight, manufacturing and labor.

Physical and e-commerce retailers are facing supply chain shortages and higher costs, with giants such as Walmart and Amazon scrambling to obtain space on container ships to restock their inventories, The Wall Street Journal reports. Smaller chains might not be able to compete as well in the new and tougher logistics normal, however.

"While Home Depot is renting its own cargo ships and Walmart is pre-buying containers, this is not realistic for most brands and retailers," Salesforce reports.