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How the delta variant stole Christmas: empty shelves, long waits — and yes, higher prices


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How the delta variant stole Christmas: empty shelves, long waits — and yes, higher prices

The Washington Post    Abha Bhattarai   9/1/21    

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More than 1 million Rainbow High dolls are primed for the holidays — but first they need to make it out of China.

The popular toys have already overcome their share of hurdles, including short-staffed factories and record-high plastic prices. But now there’s a shortage of the shipping containers that ferry them from Asian factories, warehouses and ports, to American fulfillment centers and stores.

 

“I’m afraid there is simply not enough time to get products on the shelf this year,” said Isaac Larian, chief executive of MGA Entertainment, the toy giant behind Rainbow High and such popular lines as L.O.L. Surprise and Little Tikes. “The holidays are going to be very tough and, frankly, a lot of families are not going to be able to get the toys they want.”

Mounting challenges — including factory shutdowns, computer chip shortages and clogged ports — are rattling the industry as it prepares for the crucial holiday shopping season, an eight-week window that can account for more than half of a retailer’s annual sales.

The rapid spread of the delta variant adds to the uncertainty: It already has forced a two-week shutdown of a terminal in one of China’s busiest ports, and halted operations at one-third of Vietnam’s garment and textile factories. And there are signs that consumers are pulling back. Retail sales took a hit in July, with Americans spending less on clothing, cars and furniture as delta took hold.

Smoothing out the supply chain is a growing priority: Last week, the White House appointed a port envoy to address congestion at U.S. ports. And the recent Bipartisan Infrastructure Deal includes $17 billion in investments for port infrastructure.

But those efforts are unlikely to offer much reprieve before the upcoming busy season. Analysts say they expect widespread shortages, less selection and higher prices for a number of popular holiday gifts, including gaming consoles, TVs, toys and sneakers.

%7B© Justin Lane/EPA-EFE/REX/Shutterstock Shipping containers at the Port Jersey Port Authority Marine Terminal, which is part of the busiest container port on the East Coast, the Port of New York and New Jersey, in Jersey City, N.J., in April.

“Covid has turned supply chains on their head,” said Neel Jones Shah, global head of airfreight for Flexport, a logistics technology company. “We’re seeing an astronomical rise in shipping rates, a dramatic lengthening of transit times and a logjam of cargo at every port. Shippers are scrambling to figure out how to get their goods to market in time for the Christmas selling season.”

From ports to rail yards, global supply lines struggle amid virus outbreaks

Two of the nation’s largest retailers, Walmart and Home Depot, are chartering their own ships to retrieve their products while Amazon is beefing up its fleet of cargo planes. Urban Outfitters is switching from ocean freight to air in hopes of bypassing clogged ports in the run-up to the holidays. (Amazon founder Jeff Bezos owns The Washington Post.)

Other brands are recalibrating to avoid the frenzy: Book publishers, dogged by paper shortages and shipping delays, are pushing fall releases into early next year.

“Everybody is in the same boat, saying, ‘How do we ensure a supply of goods? What is most critical? What can we do without?’" said Robert Gerwig, senior vice president of distribution and logistics at Sweetwater, which sells musical instruments and audio technology. “They’re rapidly looking for other options to ensure goods are delivered in time.”

“There is still so much up in the air”

With weeks to go before summer slips into fall, store shelves already are sparse: At Walmart and Williams-Sonoma, executives say more items are out of stock than usual. Apparel chain Anthropologie is running low on dresses and jeans. Many retailers are whittling down their toy and clothing inventories, offering fewer styles, colors and sizes, according to Nikki Baird, vice president of innovation at retail software provider Aptos.

“There is still so much up in the air, and the broader your assortment, the more risky it is that you get it wrong,” she said. “The easiest way to respond to inventory risk is to narrow the options so you can concentrate your risk to some degree.”

Everlane, which built its clothing brand around ethically sourced products, is focusing on classics like sweaters and jeans for the holidays. Even so, covid-related complications are delaying orders by weeks, or sometimes months, according to chief product officer Erika Edelson.

“Ports are congested … even causing boats to sometimes become stranded on the water,” she said. “Once our products are sold out, it may be weeks or months before we can restock.”

Shipping times double

The time it takes to ship an item from Asia to the United States has roughly doubled — 15 days by air, 90 by sea — during the pandemic, Shah said. The backlog, coupled with labor shortages and pandemic-related shutdowns at every point in the process have led to months-long waits for electronics, furniture and other imports.

%7B© Daniela Santamarina/The Washington Post

Such delays, analysts say, are likely to cascade in coming weeks. Freight volume at the Port of Los Angeles, the country’s largest port, has increased for 12 straight months.

“This remarkable, sustained import surge is pushing the supply chain to new levels,” said Gene Seroka, the port’s executive director.

Even once merchandise has made it to stores and warehouses, getting it to consumers’ homes will be an ongoing challenge. Delivery carriers like UPS and FedEx are scrambling to hire thousands of truck drivers and package handlers. The U.S. Postal Service has signaled plans to hire 40,000 seasonal workers and convert 33,00 non-career employees to career status to further scale-up capabilities.

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The holiday season produced recurring nightmares for the mail agency last year: The November election, in which nearly half the nation’s voters cast their ballots by mail, combined with a workforce straining under covid-era package volumes gummed up the Postal Service’s entire network.

Employee availability plummeted, and led to bins of packages choking walkways at sorting facilities. Food and temperature-sensitive items spoiled as they sat delayed; postal workers complained about flies swarming packages and the smell of rotting materials. Nine major sorting facilities turned away mail shipments during the height of the season, or attempted to divert it to other plants, according to an inspector general report. Scores of postal customers reported receiving holiday mail as late as April.

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This year, retailers are pulling together contingency plans, finding local and regional alternatives to national carriers and, in some cases, building up their own delivery capabilities. Target is tapping its own workers to drop off packages. Walmart is hiring 20,000 supply chain employees, including order fillers, freight handlers and lift drivers, and is creating a new last-mile service that will help other businesses get orders to customers’ homes.

“I won’t be surprised if there are delays across the board,” said Gerwig of Sweetwater. “We’ve been spoiled as a country, expecting that packages will arrive on our doorsteps within two days. But with every carrier squeezed for capacity, that is no longer the case.”

Higher prices, fewer deals

Retail is a carefully calibrated game of supply and demand. And this holiday season, analysts say both parts of the equation are up in the air.

“There is still some ambiguity about what people want to buy — and whether they will buy,” said JoAnn Martin, vice president of industry strategy for Blue Yonder, which provides supply chain management software.

Shoppers are facing higher prices and fewer discounts at a time when many are already rethinking their buying habits. Consumer sentiment fell sharply in August, to a 10-year low, according to the University of Michigan’s closely watched index. Overall inflation is up 5.4 percent from last year, and analysts say prices are likely to continue creeping up.

%7B© Kena Betancur/AFP/Getty Images Empty shelves are seen at Mary Arnold Toys. Global shipping snags are causing shortages, delivery delays and price increases — all headaches for toy stores and manufacturers.

Mattel, the toy giant behind Barbie and Hot Wheels, is raising prices in coming months, and retailers as varied as Abercrombie & Fitch and Best Buy are tamping down on promotions. Analysts say others may start adding covid delivery surcharges, especially for bulky items like furniture and exercise equipment that cost more to transport. And as more retailers rely on air freight — which costs about 10 times as much as ocean transport — they’re likely to pass on at least some of those expenses to consumers.

“Prices are going higher and staying higher,” said Baird of Aptos. She added that retailers won’t do away with free shipping promotions, but may start requiring higher minimum purchases to qualify. “Free shipping is one of the most effective promotions for online retail, so it will be the last to go,” she said.

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MGA Entertainment has raised toy prices, though Larian says it hasn’t been enough to cover ballooning expenses. Some resins have more than doubled in price since last year, and shipping containers — which used to be $3,000 apiece, are being auctioned off for as much as $22,000, he said.

In addition to the 1.3 million Rainbow High dolls, Larian is waiting on 460,000 L.O.L. Surprise dolls and 250,000 Little Tikes toys to make it across the ocean.

“We’ve raised prices a little bit, but if we go up too much — if an L.O.L. doll that sells for $10 suddenly becomes $15 — demand will go down,” he said. “Instead we’re taking a hit to our bottom line.”

The combination of shipping delays and rising costs, he says, will reshape shopping patterns. He expects consumers will begin their holiday buying earlier than usual, as well as a sales surge in January as people redeem gift cards and circle back for products still on their holiday wish lists.

“There’s no logical way that everyone is going to find what they want in time for Christmas,” he said. “Everything is up the air.”

In Vermont, Phoenix Books already has holiday cards and 2022 calendars on display, weeks ahead of schedule. Picture books and cookbooks, which tend to be printed overseas, are likely to be in short supply this year, according to Beth Wagner, general manager of the three-store chain.

“We’re telling our customers, ‘September is the new December,'" she said. “If you see something that’s important to you, buy it now.”

Jacob Bogage contributed to this report

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Could be difficult when asked for certain toys this year.

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There is a rainbow to be found amid the dark cloud of health issues plaguing the transportation industry. People will have to shop and buy locally. Dad might even have to make little Timmy a gift for Christmas instead of buying something from China! Not having the shelves stocked with the most popular gift means folks will have to shop local and that’s a good thing. I also think it’s a good thing for the children NOT to get the biggest and fastest gift they asked for but instead to be thankful for whatever it is they do receive.

 

Being in the transportation industry myself the “Golden Week” is long gone. As of the end of August there were 31 container ships anchored outside of Long Beach. The docks have empty container ships that are waiting for containers to take west. Most of those containers are on trains that can’t move due to manpower shortages. No crews available! The carrier I’m with cutoff over 1000 operating personnel last summer in response to business slowing on account of the shutdowns. They created this manpower shortage to save money. They’re hiring now but only 5-10 men for each class. At this rate it’ll be a few years before we’re back to line capacity with operating personnel. 

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