Australians have been warned not to leave their Christmas shopping until the last minute with the global supply chain crisis leaving retailers struggling to fill orders and keep shelves stocked.
The “dramatically bad” global supply chain situation in Asia could also see major Australian retailers dumping Black Friday sales as they are left with limited stock.
Bernie Brookes, the former CEO of Myer, who now runs the handbag a jewellery chain Colette, says Covid-19 shutdowns of major international ports, skyrocketing shipping container prices and shortages in raw materials have all put extreme pressure on retailers.
“What we continue to see is just this snowball down a hill, a gathering of different [Covid-19 related] influences … that means that probably the supply out of Asia has been the worst I’ve seen in forty years of retail history,” Brookes said.
“It’s quite dramatically bad, and it will not be particularly good coming into Christmas.”
Brookes predicted that customers will start to feel the material impacts of this problem in the coming months.
“Australia has a very big Black Friday, it’s the biggest retail event of the year. But if retailers haven’t got plenty of stock available they won’t be able to run 30, 40, 50% off deals … because that takes a lot of stock out of the system,” he said.
“There will also be some inconsistency of supply through the Christmas period because most people ordered Christmas stock for delivery in October, November, and there’s a really high inconsistency of supply.”
Australian Retail Association CEO, Paul Zahra, agreed, urging both retailers and customers to plan ahead.
“Retailers are having to order stock much earlier than they normally would, with most larger retailers building up healthy inventory levels to ensure that they can satisfy their customers,” he said.
“The key message for consumers in all of this is don’t leave your Christmas shopping until the last minute.”
Last month, the Super Retail Group chief executive, Anthony Heraghty, told the Sydney Morning Herald that if products were “not in the shed or on the shelf today, for Christmas this year I think the chances of it being [in stock] come that peak time is incredibly remote.”
Woolworths Group CEO, Brad Banducci also told the newspaper he was “not concerned, but … anxious”, about the impact port closures in China would have on Big W Christmas stock.
But a spokesperson for the retailer later told Guardian Australia that the Christmas stock was “already on the water and on the way to Australia”.
“We’ll have plenty of stock for our customers in the months ahead … Like every Christmas, it’s always a good idea to buy presents early to avoid missing out,” he said.
In August, China was struck by its worst Covid-19 outbreak since the start of the pandemic, causing partial lockdowns of several major ports. This including Ningbo-Zhoushan, the third busiest port in the world, creating delays and disruptions that spread throughout the global shipping industry.
Zahra flagged the skyrocketing price of shipping containers, caused in part by the multitude of outbreaks on freighters as well as altered shipping routes during the pandemic, as another serious impediment to global trade.
“Retailers are reporting that the capping of incoming flights has put significant pressure on shipping, and we are seeing container costs escalating up to four times their usual rate which may have an impact on retail prices,” he said.
Brookes confirmed Colette stores were also grappling with this challenge.
“For us, the cost of the containers have gone up between three and five times from 18 months ago,” he said.
“We’ve been able to absorb that, we haven’t raised our prices, but I think there’s an inevitability that some retailers will have to reflect that in the costs.”
Prof Amrik Sohal, a global supply chain expert at Monash University said the struggle manufacturers were facing to source raw materials was another aggravating factor, affecting almost every industry.
“There is a shortage of personnel at various works sites, in the apparel industry in Bangladesh for example,” he said.
“Also, supply chains are not operating at full capacity … so the raw material might be available but they’re not being delivered to the destination on time.”
Brookes said many in the retail sector were concerned the colossal US and EU markets reopening could push Australia to the back of the queue.
“So you’ve got a situation where the American markets and European markets are opening up and have got very heavy demands on the product. We’re at the back end of the supply chain, so potentially manufacturers might supply the American and European markets first,” he said.
But Sohal wasn’t as concerned.
“They are huge markets compared to us. We are a tiny fraction of the market for those big manufacturers anyway. What effect that will have on our local retailers? I don’t think very much,” he said.
Overall, Sohal said the impacts of the global supply chain crunch was more likely to be limited to specific brands or products and would not strip shelves bare in the lead up to Christmas.
“The thing is, we have so much variety nowadays … if one brand is not able to supply a particular type of colour or size, whatever, there are alternatives. We aren’t going to be in a situation where there is just nothing to wear or something like that,” he said.
“Personally my opinion is, we are in a global pandemic situation, right? So what if something is not available ?… I think we need to bring our expectations down as consumers as well.”
“If something’s not available, we know what the reasons are. We just have to find a different alternative product.”