This week: Shipping bottlenecks, no fuel, and worker shortages, oh my!
STICKER SHOCK
On the cusp of peak selling season, businesses everywhere are staring down the barrel of a supply crisis. The threat of less-than-usual holiday abundance looms. “This holiday season, the role of Ebenezer Scrooge will be played by the broken global supply chain,” quipped Morning Brew.
• The scenes of chaos at gas stations across England pretty much sums it up. “Even the government’s announcement about [temporary worker] visas this week showed it is focused as much on ensuring supplies of turkeys and geese for Christmas dinner as it is on the stresses on the economy as a whole,” reported The Financial Times. And it’s not just the birds. Toys (true story) will be more scarce this year following the quadruple-whammy of “rises in raw materials, high shipping costs, problems sourcing containers and outages at factories”. Even fizzy drinks won’t be spared: CO2 is in short supply, putting soda in the precious commodity category.
• Shipping rates from Asia to the UK are now 14 times pre-pandemic levels. Chinese factories – responsible for 28% of the world’s manufacturing – are having trouble keeping the lights on, with rolling blackouts throughout the country. “We’ve seen that sourcing from Asia to Europe is too complicated in times of crisis. We’re also learning that buying more local goods and services makes more sense,” said Dutch trend-watcher Adjiedi Bakas, who coined the term “slowbalization” to describe the backlash to global trade. October 1st marked National Manufacturing Day (also a true story) in the U.S. of A. “Just as unused capacity in transportation and housing were opportunities realized by Uber and Airbnb, unused manufacturing capacity represents a similar opportunity. There are thousands of small manufacturers spread throughout the United States with the expertise and capacity to fill many of the gaps created by disruptions in China,” wrote Dave Evans in Forbes.
• Recruiting workers in retail and hospitality is a major challenge, on both sides of the pond. This past year, U.S. job applications have declined 44% for retail positions. “You can have lots of really low paid, miserable retail workers or you can have a few better paid ones and hopefully upskill as many of them as possible,” said Miya Knights, a UK-based retail analyst. It’s been widely reported that restaurants are also struggling to find qualified staff, as many have sworn off the industry for good. “As forward-looking independent restaurant owners try to make the restaurant industry a business that workers will actively want to return to, some are taking pay cuts and raising wages,” observed Eater.
“Imagine that the U.S. had a market mechanism that spurred employers to voluntarily pay higher wages, offer better benefits and use workers more productively. Actually, that mechanism exists – it’s called a labor shortage,” wrote David Autor, an economics professor at MIT.
We’ll just leave that there.
LEARNING TO SAIL
Right, so how are brands and retailers dealing?
• “I think there’s a saying like, ‘Rough seas make great sailors’… and so this is our rough sea and this is how we learn to sail,” said Lindsay McCormick, founder of Bite, a line of plastic-free personal care products. The latest addition to the line – a deodorant – has been subject to every possible supply chain bump and raw materials rise in the production road. “I will definitely make sure we are not launching near the holidays again,” she continued.
• Nearly half of American small-business owners have had to raise their prices, according to the National Federation of Independent Business. They’re also dealing with irate clientele. “People are just getting really mad about things not being on time. And it’s we just kind of look at each other like, wow. I mean, [they] do not realize what we’re all dealing with,” said Katie O’Connell, co-owner of Society of the Spectacle, an eyeglass shop in Los Angeles. Seems like people could do with some real talk. Communicating honestly with shoppers about supply and shipping challenges will be critical in the run up to (what’s supposed to be) the most wonderful time of the year. “[Make] them feel involved in the process,” said Nikhil Mitter, creative director of ad agency R/GA.
• British retailers have warned that “shoppers can expect reduced product ranges and less discounting” this year. “What retailers want to avoid, of course, is the panic buying that we saw last March – so [it] needs to be managed well,” said Natalie Berg, founder of NBK Retail. “Shops have been through the mill over the past 18 months and many simply cannot afford more disruption”. Customers don’t appear to be too concerned, with nearly half planning to wait and make most of their holiday purchases on Black Friday. “DTC brands, for their part, are not pushing holiday messaging on their websites quite yet, especially since most of their inventory is not seasonal,” reported Modern Retail.
What if supply chains were shorter and smarter? What if people in the service industry were paid equitably? What if all signs are pointing to a necessary shift in the way we conduct business for the next holiday seasons to come?
“The real challenge, when it comes to thinking about supply chains, isn’t making sure that a container ship is unloaded,” wrote Amy Davidson Sorkin in The New Yorker. “It’s deciding how we want to live”.
Words by Amy Tai, creative consultant and native New Yorker now based in London.