Ongoing global supply chain disruptions are about to collide with the holiday shopping season, with retailers caught firmly in the middle.
In October, Digital.com surveyed 1,250 U.S. small business owners to find out how product shortages will affect their inventory and prices as holiday shopping ramps up.
- 53% of small business owners anticipate inventory shortages through the 2021 holiday shopping season
- Specialty stores and grocery stores will be hit hardest, with 3 in 10 predicting 60-90% less inventory than usual
- To cope with inventory shortages, 58% of retailers plan to raise prices; one-third plan to increase prices by 40% or more
- 50% of retailers who anticipate inventory shortages recommend consumers start their holiday shopping ASAP
As many as 3 in 4 small businesses could experience inventory shortages this holiday season
Fifty-three percent of small business owners surveyed anticipate inventory shortages through the rest of 2021. Another 23% are unsure whether their inventory will be lower than usual through the rest of the year.
According to Digital.com expert and digital marketing executive Huy Nguyen, there are steps retailers can take to help mitigate the effects of supply chain shortages on their inventory.
“The supply chain situation can change rapidly, so businesses should set up accounts with alternative suppliers and take the opportunity to find complementary products,” Nguyen says.
For businesses that are unsure whether they will be affected, Nguyen says, “Communicate with your suppliers now, and see if they expect supply chain or operational challenges and how they plan to address them. If possible, order more inventory in advance, or ask suppliers to pre-order so you have priority when new products are available.”
Nearly half of retailers predict inventory will be 20-50% lower than normal
Forty-eight percent of retailers who anticipate lower-than-average inventory this holiday season say their stock stock will be anywhere from 20% to 50% lower than usual.
Twenty-six percent predict their inventory will be 60% percent to 90% percent lower than usual.
Specialty stores and grocery stores to be hit the hardest
Thirty-one percent of specialty stores and 32% of grocery stores predict their inventory will be 60% to 90% lower than normal. By comparison, 26% of discount stores and 19% of department stores anticipate shortages of this magnitude.
“Specialty stores are hit harder by the supply chain shortages because of their niche offerings and limited options when it comes to manufacturers or suppliers,” Nguyen says. “Department stores and discount stores have more options to find alternative suppliers and offer a variety of different products.”
However, shoppers may still be out of luck at big-box department stores, depending on what they are looking for. Nearly 4 in 10 department stores expect to have 30% to 50% less inventory this holiday season.
58% of businesses experiencing inventory shortages will raise prices
Heading into the holiday shopping season, consumers may want to save some extra money.
The majority of retailers predicting inventory shortages, 58%, will cope with the lack of stock by raising prices. Another 23% say they’re still undecided but are considering price increases.
Among specialty stores and department stores, 68% and 64%, respectively, plan on hiking up prices to compensate for reduced inventory.
Businesses with the overhead of brick-and-mortar locations are more likely to raise prices on their goods this holiday season. Sixty-three percent of in-person retailers who anticipate inventory shortages are planning to raise prices, compared to 53% of online-only retailers, and 57% of retailers that operate online and in-person.
One-third of retailers plan to increase prices by 40% or more
Customers can expect to see price hikes that range from eyebrow-raising to eye-popping.
Thirty-five percent of retailers will increase prices on in-demand items by 40% or more, while a similar number, 37%, are raising prices 10% to-20%.
Specialty stores with inventory shortages are most likely to increase prices by a significant amount. Twenty-six percent of these retailers plan to increase prices by 40 percent, while another 18% will raise prices by 50 percent or more.
Shoppers looking for special ingredients and seasonal foods will also see higher-than-usual prices. Twenty-two percent of grocery stores experiencing inventory shortages will compensate by raising prices 50% or more.
Even discount retailers are feeling the pinch, with 3 in 4 planning to raise prices between 10% and 30% this holiday season.
Retailers recommend consumers start holiday shopping ASAP
In light of these shortages, some retailers think if shoppers haven’t already started their holiday purchasing, they’re behind the curve.
Fifty percent of retailers who are anticipating inventory shortages say consumers should have started their holiday shopping in October. Another 28% recommend starting in November.
Only 19% believe shopping in December gives consumers enough time to get everything on their wishlists.
Nguyen also encourages consumers to start shopping early, and consider alternatives to traditional gifts purchased in stores.
“If you can’t find that perfect gift, consider giving someone a gift card to their favorite store or restaurant,” he says. “Gifting experiences has also become very popular recently, and there are many local options to choose from.”
All data found within this report derives from a survey commissioned by Digital.com and conducted online by survey platform Pollfish. In total, 1,250 U.S. retail business owners were surveyed. To qualify for the survey, each respondent had to own a retail business with less than 500 employees. Appropriate respondents were found via a screening question. This survey was conducted over a three-day span, starting on October 4, 2021, and ending on October 6, 2021. All respondents were asked to answer all questions truthfully and to the best of their abilities.