LEXINGTON, Ky. (November 12, 2021) – The saying goes, “This is the most wonderful time of the year,” but massive supply chain disruptions leave shelves empty and raise prices for what’s in stock.
Then there are the truck shortages. Delivery delays can leave buyers empty-handed this holiday season.
At this time of year, the economy also relies heavily on consumer spending. According to the National Retail Federation, holiday sales represent about 20% of annual retail sales in the United States.
To help shoppers make the most of the holiday season, UKNow called on the expertise of Carol Chavez and Corinne Hassler from the Gatton College of Business and Economics at the University of Kentucky.
Chavez is a lecturer in the Department of Marketing and Supply Chain and Hassler is an assistant professor in the same department. In the question-and-answer session below, they offer strategies to help reduce stress and save you this shopping season.
UKNow: This holiday season buyers have heard a lot about supply chain disruptions. What does that mean exactly?
Chavez: A supply chain is simply the trade chain through which products pass from the raw materials needed to make the product, to manufacture the product, and finally to sell the product to a consumer. There are a lot of “links” in the chain. A manufacturing company located in China can purchase components in Thailand, and the product is ultimately sold to the United States. The components must travel from Thailand to China by truck or train which must pass through at least one other country to get to China. Once the product is made in China, it must travel by truck or train to a seaport and be loaded onto a ship. This ship will cross the Pacific to the United States where it will arrive at a seaport in southern California. It must be unloaded and go to a distribution center. From the distribution center, it will travel by truck, and possibly by plane, to get to a retail store or your porch. Any âlinkâ in this chain can fail. Today there are shortages of raw materials, traffic jams in seaports, shortages of truck drivers, etc. The combination of these weak and broken links in the supply chain is called disruption, and many supply chain disruptions are happening right now.
UKNow: How will the supply chain affect holiday sales? Can buyers still expect deals or should they be willing to spend more this year?
Chavez: Expect higher prices and fewer options. The reality is that supplies of many raw materials and components continue to be limited to include rubber, aluminum, and semiconductor chips. These shortages combined with congestion at shipping ports and a shortage of truck drivers are driving up prices across the board. It costs companies five times more to ship containers of goods from overseas than it did a year ago. Ultimately, large companies absorb as much of this increase as possible, but some of that cost will certainly be passed on to consumers.
UKNow: Should consumers buy sooner, even online? What can buyers expect regarding delivery delays?
Chavez: From a supply chain perspective, I recommend consumers prepare for the holidays sooner than ever. If you order items online, pay special attention to where your items are coming from and whether they are in stock. Expect much longer than normal lead times for anything shipped from outside the United States
UKNow: What, if anything, can consumers do to ensure their purchases arrive on time during the holiday season?
Hassler: There are a few tactics that consumers can use to improve their chances of buying on time. The most important thing would be to shop as early as possible, to compensate for potential delays. Consumers may also consider shopping at large retailers (eg, Walmart, Best Buy, Amazon, etc.). Due to the scale of their operations, these companies may be better equipped to handle such delays / disruptions. I would also recommend doing some research online ahead of time – identifying stores that have your items in stock and purchasing them in person if possible. For those out-of-stock items, set email reminders when they’ve been restocked.
UKNow: Black Friday is a tradition for many families. What can we expect as the pandemic continues and labor shortages persist?
Hassler: This will be another year of adaptation – another year of learning how to live our life better in the midst of a pandemic, and more specifically, how best to check out our holiday shopping list in a fun, but safe way. While it won’t be as restrictive as it is in 2020, there will still be a need for flexibility.
A key element of this flexibility is the continued reliability of online shopping. Online shopping will be more relevant than ever as COVID endures, variants have developed and groundbreaking cases create new concerns. Yet it is evident that this year, consumers are eager to get back to ânormalâ. I suspect this will result in much more foot traffic than in 2020. Potential tensions could arise from increased crowds and differing opinions regarding safety precautions (eg wearing a mask or not).
On a more positive note, this year there seems to be even more excitement surrounding the holidays. Overall, life looks a little less bleak than in 2020; we are better equipped to live with a pandemic this year than last year. With a better understanding of the virus and the distribution of the vaccine, people are feeling more comfortable than in 2020. This heightened excitement has already manifested itself in an increase in planned spending. However, this can be at odds with increasing operating costs for retailers, causing them to potentially offer fewer door-to-door deals and less variety of items.
UKNow: All that being said, can Black Friday and Cyber ââMonday still be an effective way to save on holiday shopping?
Consumers should develop a âgame planâ in advance. Write down what they need, where they’re offered, and compare costs online before sales hit, and it’s time to put the buying plan into action. Sticking to your list is also important, otherwise consumers can be easily susceptible to marketing tactics and environmental (in-store) cues intended to encourage them to make impulse purchases.
Chavez: There will still be deals on Black Friday, but they won’t be as good as deals from years past. Offers will be deducted from the higher prices. The reduced price this year could be similar to the regular price paid two years ago. When it comes to Cyber ââMonday, pay close attention to estimated delivery dates before finalizing payment. While it is important to receive your purchase by a specific date, Cyber ââMonday may not be your best choice. Conversely, the online industry is aware of this and may offer more incentives to buy online. I agree with Professor Hassler that the main thing is to be flexible.
UKNOW: It’s easy to get carried away with the holiday spirit and overspend. Do you have any tips to stay within your budget?
Hassler: Again, preparation is key. Mentally keeping track of your purchases is often inefficient and costly. Most consumers are not great mental accountants. It can be easy to underestimate what they spent in the store, especially when using a credit card.
Consumer research tells us that spending on a card is less psychologically painful than spending with cash, and therefore the loss of that money is much less, making it more difficult to track spending. Moreover, the loss of this money is delayed and is not immediately withdrawn from the consumer’s wallet, which also increases the difficulty of such mental accounting. Retailer prices don’t help either. Consumers have been known to print on the first number in a price sequence. So, if a product is priced at $ 19.99, many consumers mentally consider that item to cost $ 19, although it is realistic to be around $ 20. It doesn’t seem like a big deal for smaller amounts, but this inadequate mental accounting certainly adds up for larger amounts. For example, assuming that $ 199 is closer to $ 100 than $ 200 can easily derail a budget.
One final buying tip: Be aware that often the items you are looking for (eg Retailers hope this tactic will entice consumers to buy items that are not necessarily on their shopping list.
UKNow: The COVID-19 pandemic has instilled new behaviors in shoppers – who spend more time and money online – is this a trend that could become permanent?
Hassler: Certainly. Online shopping was already gaining ground before the pandemic, but it is now even more standardized. Notably because it was the only purchasing method available for so many months. In an effort to adapt to our new way of life, many retailers have even adopted a hybrid purchasing model – combining the standards of pre-pandemic and current pandemic life. For example, despite resuming normal operations for many retailers, they still offer an online curbside delivery / pickup option. They too have been conditioned to this ânew normalâ.
UKNow: Are there any final tips you would like to add?
Hassler: Two final remarks: 1) I would like to caution consumers to be aware of benchmark prices when trying to stay on budget or get an offer this holiday season. While a product may be listed as âon saleâ, in reality, its price can be set at the retailer’s ideal value and simply labeled âon saleâ to attract the consumer. In other words, not all sales are created equal. 2) Retailers know that consumers love a good deal and use this information to entice consumers to buy things they wouldn’t normally buy. So when you are presented with an âofferâ that is not on your shopping list, check with yourself and ask yourself: is this something that I really want / need? Is this really an offer (i.e. an actual discount)? Or is it just designed to pull me in on the prospect of a deal?
Chavez: Don’t make promises, be flexible and get back to basics. We promised our son the new Xbox for Christmas in 2020 and still have failed to deliver on that promise. Maybe now is a good time to start new traditions with homemade gifts. This is what my family intends to do, and I am so happy!