Australians urged to plan ahead for Christmas shopping amid ‘dramatically bad’ global supply chain crisis | Retail business
Australians have been warned not to leave their Christmas shopping until the last minute with the global supply chain crisis leaving retailers struggling to fill orders and keep shelves fully stocked.
The “dramatically bad” situation in the global supply chain in Asia could also see major Australian retailers abandon Black Friday sales as they find themselves with limited stocks.
Bernie Brookes, the former CEO of Myer, who now runs the handbag of a Colette jewelry chain, said Covid-19 closures of major international ports, soaring shipping container prices and shortages of commodities have all exerted extreme pressure on retailers.
“What we keep seeing is just this snowball down a hill, a gathering of different [Covid-19 related] influences… it means sourcing from Asia was probably the worst I’ve seen in the forty-year retail history, ”said Brookes.
“It’s pretty dramatically bad, and it won’t be particularly good as Christmas approaches.”
Brookes predicted that customers will begin to feel the material impacts of this issue in the months to come.
“Australia has a really big Black Friday, it’s the biggest retail event of the year. But if retailers don’t have a lot of inventory on hand, they won’t be able to run offers of 30, 40, 50%… because that takes a lot of inventory out of the system, ”he said.
“There will also be some supply inconsistency over the Christmas season, as most people have ordered Christmas inventory for delivery in October, November, and there is a very large supply inconsistency.”
Australian Retail Association CEO Paul Zahra agreed, urging retailers and customers to plan ahead.
“Retailers need to order inventory much earlier than they normally would, with most large retailers building healthy inventory levels to ensure they can keep their customers happy,” he said.
“The key message to consumers in all of this is not to leave your Christmas shopping until the last minute. “
Last month, Super Retail Group chief executive Anthony Heraghty told the Sydney Morning Herald that if the products were “not in the shed or on the shelf today, for Christmas this year, I think the chances that it is [in stock] coming, this rush hour is incredibly distant.
Woolworths Group CEO Brad Banducci also told the newspaper he was “not worried, but … anxious,” about the impact that port closures in China would have on Big W’s Christmas stockpile. .
But a spokesperson for the retailer later told Guardian Australia the Christmas stock was “already on the water and on its way to Australia.”
“We will have a lot of stock for our customers in the coming months… Like every Christmas, it’s always a good idea to buy gifts early so that you don’t run out,” he said.
In August, China was hit by its worst Covid-19 outbreak since the start of the pandemic, causing partial closures of several major ports. This includes Ningbo-Zhoushan, the third busiest port in the world, creating delays and disruptions that have spread throughout the global shipping industry.
Zahra pointed to the surge in sea container prices, caused in part by the multitude of epidemics on freighters as well as altered shipping lanes during the pandemic, as another serious obstacle to global trade.
“Retailers report that the cap on inbound flights has put significant pressure on shipping, and we are seeing container costs increase up to four times their usual rate, which could impact the prices of detail, ”he said.
Brookes confirmed that Colette stores are also struggling with this challenge.
“For us, the cost of containers has increased between three and five times compared to 18 months ago,” he said.
“We were able to absorb that, we didn’t increase our prices, but I think it’s inevitable that some retailers will have to reflect that in the costs.”
Professor Amrik Sohal, a global supply chain expert at Monash University, said the struggle manufacturers face to source raw materials is another aggravating factor, affecting nearly every industry.
“There is a shortage of personnel on various sites, in the garment industry in Bangladesh for example,” he said.
“Also, supply chains are not operating at full capacity… so raw material may be available but it is not getting to its destination on time.”
Brookes said many in the retail industry fear the colossal reopening of US and European markets could push Australia to the back of the pack.
“So you find yourself in a situation where the American and European markets are opening up and have very high demands on the product. We are at the back of the supply chain, so manufacturers could potentially supply the US and European markets first, ”he said.
But Sohal was not so concerned.
“These are huge markets compared to us. We are only a tiny fraction of the market for these big manufacturers anyway. What effect will this have on our local retailers? I don’t think much, ”he said.
Overall, Sohal said the impacts of the global supply chain crisis were more likely to be confined to specific brands or products and would not bare the shelves as Christmas approached.
“The point is, we have so much variety these days… if a brand can’t provide a particular type of color or size, whatever, there are alternatives. We’re not going to be in a situation where there’s nothing to wear or anything like that, ”he said.
“Personally, my opinion is that we are in a situation of a global pandemic, aren’t we? What if something is not available?… I think we also need to lower our expectations as consumers. “
“If something is not available, we know what the reasons are. We just have to find a different alternative product.