Q4 2021 Market Watch: Holiday Peak Season Part 2
Key Takeaways
- November and December sales will rise between 8.5% and 10.5% YoY
- Online out-of-stock notifications are up 172% YoY
- Consumer prices are up 6.2% YoY
- Two-thirds of retailers will offer same-day delivery by the end of 2021
Supply chain disruptions are no secret; port congestion, labor shortages, and delivery delays make headlines every week. As the Black Friday / Cyber Monday weekend approaches, retailers and brands grapple with how products might not make it to shelves. Consequently, 61% of consumers began shopping for the holidays ahead of BFCM to get the products they want on time. But as in-store Black Friday shopping makes a comeback, consumers and retailers alike face implications from potential stockouts.
Supply chain bottlenecks drive inflation
A national labor shortage, limited capacity, and higher logistics costs inevitably increase consumer prices—inflation at its finest.
- The country is in the middle of “The Great Resignation.” Approximately 4.4 million Americans quit their jobs in September 2021
- The physically demanding nature of jobs in logistics, lower wages, and a lack of flexibility in hours impact hiring and retention rates. The average turnover rate for logistics workers is sitting at 31%
- With a strained workforce unable to move and process goods, delays happen. More than 33% of U.S. shipments flow through Southern California’s ports, which are currently experiencing 25-30 day delays
- For containers that sit idle for at least nine days, ports are charging $100 per container per day to move containers more quickly, increasing in $100 increments each successive day—another hit to shippers’ margins. This applies to 47% of the backlog at the Port of Los Angeles
- Warehouse prices are at a fourth-consecutive all-time high—hitting 89.8 on the Logistics Manager Index, a level that LMI classifies as a significant increase in price from the all-time average of 72.7
- Though peak-season spending isn’t slowing down, consumer prices are up 6.2% YoY
Shippers aim to satisfy shoppers, despite Q4 challenges
Walmart, Amazon, Best Buy, Costco, Lowe’s, Target, and Wayfair are among retailers that implemented pre-Black Friday promotions to encourage shoppers to buy early. And businesses are expanding their fulfillment operations to meet customer expectations better.
- 60% of retailers currently offer BOPIS, an 18% increase since 2020
- 55% will offer curbside pickup to offset in-store traffic, an 67% increase since 2020
- Two-thirds of retailers will offer same-day delivery by the end of 2021
Two-thirds of retailers will offer same-day delivery by the end of 2021
Bringg, 2021
But each of these offerings requires a different labor mix: In-store associates, warehouse fulfillment workers, last-mile delivery drivers. Big retailers are offering higher pay, access to education, and other benefits to attract and retain talent during the peak season. However, a diluted labor pool presents additional challenges:
- 61% of logistics providers say hiring peak-season labor is difficult
- Peak-season hiring incentives will continue, which impacts margins—63% of logistics providers say wages will increase through H1 of 2022
- Mass hiring efforts take a toll on productivity: New eCommerce fulfillment workers need one month to get up-to-speed on job duties
Consumers embrace omnichannel retail
Despite ongoing supply chain challenges, BFCM sales will increase in comparison to 2020. Holiday shoppers plan to use a mix of eCommerce, in-store, and curbside pickup options during peak-shopping weekend.
- eCommerce remains a dominant channel this season, with 78% of consumers planning to shop online for the holidays
- With consumers less anxious about being in public spaces, 64% of holiday shoppers will shop in-store on Black Friday, up 51% YoY
- Shoppers will still avoid crowds, and running out of time to make in-store purchases in a consistent holiday trend. Subsequently, curbside pickup will peak in the days before Christmas and could surpass 40% of all online orders
- November and December holiday sales will rise between 8.5% and 10.5% YoY, reaching $859 billion in sales. Last year, sales rose 8.2% from 2019 to $777.3 billion. Before the pandemic, a 4.4% YoY increase in holiday spending was standard
64% of holiday shoppers will shop in-store on Black Friday
NRF, 2021
But can retailers deliver? Ongoing supply chain disruptions through the end of Q4 threaten shippers’ margins and customer satisfaction.
- Stockouts are a big problem ahead of BFCM. Retailer out-of-stock notifications are flooding consumers, up 172% since this time last year and up 360% since 2019
- The most popular out-of-stock categories include apparel, sporting goods, baby and toddler products, and electronics
- As much as 20-25% of the goods stuck at the ports are unlikely to make it onto shelves in time for Black Friday
Out-of-stock notifications are flooding consumers, up 172% since this time last year and up 360% since 2019
Adobe, 2021
Looking ahead
BFCM is days away. Shoppers face stockouts and inflated costs; retailers face ongoing supply chain bottlenecks. Multiple fulfillment options (BOPIS, curbside, in-store, eCommerce) increase the chances of inventory miscalculations. Beyond peak season, omnichannel retail growth increases the need for capacity—labor, warehouse, and transportation. However, supply is limited, and the long-term effects of inflation will be telling.
Reports on Black Friday / Cyber Monday performance typically come out in December, so stay tuned for results and key learnings from the peak-season shopping weekend.
