The hot topic these days with the approaching holidays is the disruption with the supply chain. In fact, many are stressed over the worker shortage and delays that originated from the pandemic.
Since January 2020, many countries have gone into periods of lockdown, meaning most employees couldn't work in factories, and thus, the production of many goods was stalled. This lack of production then impacted the supply chain and significantly increased the time it took to deliver goods.
Now, we're seeing a buildup of cargo ships that are carrying goods sitting in ports and a shortage of workers to deliver those goods from the ports to their respective stores. The New York Times even mentions that large companies are seeing the effects too. Target and Home Depot had to wait several weeks, even months, just to get their products on ships.
In September, when there was a massive clog of ships delivering goods in California, there were 132 ships waiting to dock to deliver goods to the U.S., according to this USA Today article. At one point, 44 ships were anchored off the coast of Los Angeles and Long Beach while 25 were drifting at sea waiting to dock. During normal circumstances, it's rare to have a ship without a place to dock when it reaches its destination. At most, there could be one ship waiting for a place to unload goods.
And to top it all off, scarcity of items means inflation. Pre-pandemic, it cost around $2,000 to ship a container from Shanghai to Los Angeles. At the beginning of this year, that cost increased significantly to $25,000. The cost of individual goods has also increased.
When we began seeing the effects of the supply chain issues, the shortage impacted toilet paper and PPE. Now, it's impacting holiday shopping. One of the main problems we're experiencing right now is the buildup of cargo ships in the ports and the shortage of truck drivers.
What does this mean for the advertising industry? Consumers and advertisers alike are trying to answer this question and figure out how this shortage will influence the holiday season.
As the holidays approach and the news increasingly focuses on the supply chain issues, many consumers are growing incredibly anxious. A GoBankingRates poll showed that 44% of consumers can’t find the items they need, which is leading to stress and anxiety. 62% of consumers are apprehensive because items that are now sold out will impact their future plans.
Currently, there's a high demand with a considerably lower supply, which means goods are selling out quickly. People are nervous that they won't be able to get the gifts their families want for the holidays, let alone find goods that they need on a regular basis.
These problems with the supply chain are impacting almost every industry. Many cars and electronics can't be produced as quickly because of the lack of chips, and the production of meat, medicine, and household products has been hit hard.
So what can consumers be doing? Start looking for gifts early this year. Consider buying gift cards to offset some of the burden that companies are currently facing. And, expect later deliveries than usual.
Advertisers are encouraging consumers to start their holiday shopping as early as possible. Amazon even began offering Black Friday deals back in October, partly as a tactic to increase demand. The company saw demand decreasing when items were going out of stock.
Some advertisers may decrease their marketing spend during the holidays this year because of the supply chain crisis. James Zahn, senior editor at the Toy Insider industry publication said, "You can't market a toy that you don't know is actually going to be on the shelves."
However, many consumers are planning to spend more this holiday season. Deloitte predicted that holiday spending will be up 9% this year compared to 2020. E-commerce sales are also projected to increase anywhere from 11-15%. With these predictions in mind, investing in advertising through the end of the year might be a good idea.
Julio Lopez, the director of retail at Movable Ink, gave advice on how advertisers and brands should approach the holiday season this year: "Marketers must remain agile and react rapidly to the operational challenges from shifting landscape through content powered by 1:1, automated data via data sources that connect experiences across channels."
AdAge suggests that brands can combat this crisis by being more human-centric, developing positive brand friction, being outcome-focused, embracing partnerships, and making sustainable choices. Brands also need to continue providing the best customer experience they can. This includes consistently showing up for customers while remaining flexible, agile, and proactive.
Other things brands can be doing in the meantime is to order items from local vendors, consolidate vendors, and buy essential items in bulk whenever possible.
How long will we be experiencing these shortages?
While many of us are feeling the impacts from this dilemma exacerbated by the holidays, the worker shortage and supply chain problems will be here to stay for several months. Nick Vyas, executive director at the Kendrick Global Supply Chain Management Institute at the University of Southern California Marshall School of Business, told ABC News that "We are in for at least four to six months for it to actually catch a break."
As consumers assess what and when to purchase, advertisers are evaluating the benefits of establishing brand awareness during this time. That way, when supply returns, the brands that invested in ad spend will reap the benefits and be top of mind when the time comes.