Will Shippageddon End in a Giant Sale? - Episode 213

DESCRIPTION

This week on the eCommerce Braintrust podcast, Kiri recaps a video she shared on LinkedIn and reads some comments she has received since. She talks about the supply chain disruptions and how they will affect the timing of sales events in the future, two themes conflated from two of her favorite podcasts (linked below).

Ports, warehouses and trucking lines are all backed up with inventory, and there may actually be an excess of inventory in the system due to retailers increasing their orders in a bid to get ahead. Eventually, the logjam will be resolved, but what will happen to the excess inventory?

Make sure you tune in to find out more!

“Eventually this bubble will deflate. I think it’s reasonable to expect that things will start to cool within 6 to 12 months.”

— Kiri Masters

KEY TAKEAWAYS

Securing space on container ships and accessing containers themselves has become very challenging. As a result, retailers like Home Depot and IKEA have begun chartering their own container ships. However, when the ships arrive, port capacity is a bottleneck that all ships then need to deal with.
NYT's The Daily podcast interviewed the operator of Savannah GA port who said that ships are currently anchored 17 miles offshore, waiting on average 5 days at sea to unload. In normal times, there is 0 days waiting time to unload.
According to the port, the retailers' warehouses are already full with inventory. Because of that they are delaying pickups which further clogs the system.
Some 3PLs are full already so they are not accepting new accounts.
Biden's push for 24/7 port operations will help part of the problem. However, it won't help the fact there is not enough warehouse space or truck drivers to actually get the inventory out.
Eventually, the logjam will be resolved. Nobody is sure when, but this is a bubble that will eventually deflate. If it starts to really clear up in 6 to 12 months’ time, for example, this is what we could expect:
- The holidays are well and truly over. Those who received gift cards in lieu of gifts this Christmas would have already redeemed them.
- Government incentive payments have stopped so many shoppers feel less flush.
- Prices of consumer goods will have adjusted to inflation as well as to accommodate the higher prices of moving things around, so products would cost more next year.
Brands and retailers will be sitting on mountains of inventory next year that they won't be able to move without huge clearance sales in mid-2022. Over-ordering has become a problem, and as a result:
- Huge summer sales will need to occur.
- Amazon Prime Day 2022 will be absolutely huge as brands try to offload excess inventory (while the Turkey 5 discounting in 2021 will be very modest).
- The discounts necessary to move inventory will put huge pressure on profit margins for retailers and brands next year.
What the response was on LinkedIn:
- People mostly agreed on modest discounts this holiday vs next spring/summer.
- The need for flexible storage space was emphasized by Flexe.
- Massive unexpected discounts of out-of-season products is another theme that came through.
- Anders Hjorth stated that this shakes up the traditional patterns of commerce. Sales were about clearing stock back in the days, now they are shopping events.
- Paul Becker, a retail consultant, said he had not heard about over-ordering.
- Shooki Grasiani from South Beach Bubbles concludes by saying that this could be a historic opportunity to bring back to the USA some home manufacturing capabilities to allow just-in-time lean methodology operations.