By Dr. Cynthia Silvia, DHA
Faculty Member, School of Business
Could a shortage of toys make us rethink how we celebrate the holidays? Popular toys and other products may be in limited supply this Christmas due to pandemic-related disruptions.
As a result, manufacturers and retailers may see their bottom lines be adversely affected during the holiday season. However, this disruption could also create the perfect opportunity to reshape the way we celebrate the holiday season and focus on more than just material goods.
Pandemic-related issues such as rising shipping costs, a shortage of truck drivers, and a backlog of shipping containers sitting off the East and West Coasts could disrupt retailers’ ability to receive new goods in time for the holidays. However, holiday shortages are nothing new.
In past years, for instance, toys such as Cabbage Patch Kids and gaming consoles were in short supply. Today, these types of toys are manufactured In China and Japan, creating shipping issues for some businesses. However, larger retailers such as Walmart and Target can offset shortages by buying their own shipping containers, absorbing the costs of U.S. air freight, and taking other proactive measures to ensure that their inventory arrives in time for the Christmas season.
Consumers looking for those must-have toys may consider shopping earlier to avoid a last-minute scramble for highly desirable, hot items this holiday season. Another option is to choose handmade toys rather than manufactured toys.
Shoppers might even consider offering experiences instead of toys as an alternate gift, creating a learning opportunity for children to rethink the true meaning of Christmas. For many parents, this strategy could result in a more traditional and less stressful holiday.
The Various Factors Causing Shortages
A recent U.S. Department of Labor report noted that 4.3 million jobs were available in the U.S. This labor shortage currently stands in the way of a full economic recovery, including the production of fewer toys.
There is also a lack of shipping containers, which has in turn impacted the global supply chain. As a result, supply chain problems have made it difficult for retailers to keep enough toys and other necessities such as household products, wrapping supplies, and Christmas décor on the shelves.
Shipping’s Rising Costs Could Lead to Higher Prices for Consumers
According to a Forbes article written by Richard Howells, 76 container ships are currently waiting off the California coast, causing a backlog that is predicted to last into 2022. Each container ship has 14,000 containers with approximately $100,000 worth of inventory, and the average cost of shipping products from China to California in this way is $20,000.
This expense is a 650% increase from the $3,000 it cost to move products before the beginning of the COVID-19 pandemic. Even if the goods make it to landfall, the next obstacle is a shortage of truck drivers to transport products to retailers across the country.
Now, toy prices are on the rise as businesses try to recoup their shipping costs. Freight from China to California before the pandemic hit was an average of $3,847 per 40 containers.
Today, that same container can cost as much as $17,377 to ship, according to Freightos, a Hong Kong-based online marketplace. Due to this increase in shipping expenses, product costs have increased by 46%, and products take an average of 73 days to get to their final destination.
More Consumers Are Expected to Return to In-Person Shopping This Holiday Season
Despite supply chain disruptions, the National Retail Federation predicts that holiday sales in 2021 will increase by 8.5 to 10.5% in comparison to 2020, resulting in sales of $843.4 to $859 billion. During 2020, an increased number of shoppers used e-commerce sites to meet their holiday needs. With life slowly returning to normal, schools back in session and people returning to in-person work, consumers are expected to return to in-store shopping for the traditional holiday shopping experience.