Retail Rap: Holi-delays?
Will the holiday shopping season be affected by chaotic, disruptive and potentially costly delays and shipping problems? That sounds like an extreme outcome, but it’s on my mind after reading a recent article in Women’s Wear Daily (WWD) entitled Panic at the Ports as Holiday Looms. The piece outlines the drama unfolding at West Coast ports like Los Angeles and Long Beach, where congestion, delays, and an extended “union and management dispute” could put a serious dent in the ability of retailers and brands to get their holiday shipping completed on time and on budget.
Some retailers have already spent millions handling the slowdown, and more have reportedly been trying to arrange contingency plans in the event that the port disruption escalates. But the dispute, which involves not only complex labor issues, but also some formidable logistical obstacles (the article attributes some of the congestion to “a shortage of chassis since September, a shortage of truck drivers and delays associated with unloading mega-container ships”) seem unlikely to be resolved in a timely manner—a fact that has some calling for Presidential intervention.
Whether or not Obama steps in, the stakes here are high: a five-day shutdown has been estimated to cost the U.S. economy somewhere in the neighborhood of $2 billion a day. As for individual retailers, the impact of a shutdown or severe/extended delays would be tougher to gauge—but I’m convinced that it would be substantial. Brick and mortar retail would be affected in a number of ways, none of them good. If a retailer doesn’t have the product in a timely fashion (i.e. in stock and available for early holiday shopping) there is a cascade of negative outcomes: first and most importantly, the consumer doesn’t have access to the product, but in addition to that, the retailer is more likely to get stuck with the product after the holidays. It’s really a sort of double financial whammy. A triple whammy if you factor in the loss of good will and potential long-term damage to the brand. And if you think that sounds too dramatic, think about what happens when Store A doesn’t have what you want—you go elsewhere. And the more that happens, the less likely you are to go back to that store next time. The urgency and heightened financial stakes of the holiday shopping season can only make this dynamic more pronounced.
If drama at the ports and a potential West Coast shutdown weren’t enough to worry about, I have to think retailers are a little worried that 2014 might see a continuation of the holiday season delivery issues we saw last year. Even with carriers like UPS delivering well into the night and up until the last minute on Christmas Eve, there were a tremendous amount of packages that simply didn’t get delivered. This was partly weather-related—as the end of 2013 saw some truly historic weather disruptions—but industry analysts will tell you that the delivery issues were as much caused by volume as by weather. Which makes sense, if you think about it. We talk constantly about how online and mobile purchases are taking a bigger bite of the retail apple with each passing year, and it seems logical that at some point delivery services will have trouble keeping up with the increased volume.
If you want an unlikely example of how carriers are working to supplement their existing infrastructure and capabilities, consider this: no less than Amazon is now using the much-criticized and oft-struggling U.S. Postal Service to help with weekend and holiday deliveries! To me, that’s a little bit like the New York Yankees looking to the Bad News Bears for pitching help.
The big question to my mind is this: will the delivery companies be ready this year? Have they adjusted in the wake of the struggles last holiday season? Seasonal hiring and other adjustments can only do so much, after all. If these issues arise again this holiday season, it will be interesting to watch and see if these volume-related delivery snafus remain restricted to shipments going to consumers’ homes, or if deliveries to brick-and-mortar retailers will be affected.
What do you think? Is this all a lot of hand-wringing over nothing, or will 2014 be the year that a dysfunctional shipping system left a lump of coal in the retail industry’s stocking? Leave a comment below, or email me at [email protected] to keep the conversation going.