We all remember Christmas 2020 and how difficult it was to get presents to loved ones on time. Shipping delays were rampant and product stock-outs were widespread. You’d think with Christmas 2021 on the horizon the various lessons learned from last year’s disastrous holiday season would prompt sweeping changes in businesses and major shipping carriers who experienced unprecedented online sales growth, but we are here to inform you that we expect things to be much worse in 2021.
Last holiday season the US experienced unprecedented e-commerce growth due to the threat of the coronavirus. With many shoppers turning to their computers instead of in store purchases, online order volume reached an all-time high. Over the course of 2020 E-commerce sales grew by a record 32.4% that many retailers, warehouses, and shipping carriers struggled to keep up with. At the peak of the holiday season many packages were delayed as many as three weeks leading up to the holiday and many arrived after Christmas had already passed. For many families this was disastrous. Many loved ones had to forego opening a present under the Christmas tree on Christmas morning only to receive their brown box in the mail two weeks later creating a massive backlog of returns for small businesses.
From this experience, many sellers, warehouses, and shipping carriers implemented plans to increase their capacity to be able to keep up with the growing demand for ecommerce that was prompted by the coronavirus pandemic. Even as restrictions began to ease, many consumers enjoyed the newfound freedom of shopping online. Unfortunately, due to elevated unemployment benefits, upward pressures on the labor market, and a shortage of many supplies commonly used in warehousing and logistics such as pallet or cargo containers, there has been minimal gains in capacity across the logistics industry. If you go on any job board around the nation you will see countless posts begging for warehouse labor, delivery and truck drivers, and package sorters and processors. The growth in logistical capacity is being yet again outpaced by the growing demand of ecommerce.
So far in 2021 we have seen shortages of everything from lumber for pallets, corrugated material for boxes, chips for automated equipment and forklifts, and a lack of available shipping containers or chassis to carry them from port. Pallets have risen from a low average $3 for a B-grade pallet to well over $10 if you can find them on the market. Many warehouses and logistics companies have been forced to turn to brand new pallets made of expensive lumber that has also seen a surge in prices. The price of ocean freight as well as FTL and LTL freight have greatly increased. The price of sending a container from Hong Kong to New York has increased over 500% in the last year. What used to cost an importer a few thousand dollars in transportation now costs tens of thousands of dollars.
This increase in demand has placed undue strain on ports across the world. If you are an importer and were able to afford the elevated transportation costs for ocean freight, you are then faced with the issue of getting your container to port in a reasonable amount of time. Today we are facing unprecedented wait times at ports with over 70 container ships outside of the LA port at the current moment. This is creating even more strain on the availability of containers and trucks and chassis to move them. Additionally, many ports around the world can be closed at a moment’s notice due to coronavirus outbreaks, especially in China.
You might be asking how this will affect me this holiday season and why should I be alarmed? Currently the movement of goods across the world is experiencing unprecedented delays that could affect stock levels headed into the holiday season. Many retailers may not get the inventory that they expected to have for the big sales such as Black Friday or the week before Christmas. Because of this many sought after gifts may be very hard to find or even impossible. On top of this we may see elevated prices as importers are paying significantly more for the capacity that they are able to get their hands on. We should see some of these costs pushed to the consumer overtime as more expensive stock reaches our shores. If you wait till the last minute to purchase a Christmas gift, the post office, UPS, FedEx, and any other carrier you can name will most likely fail you and you will receive your gift late. Many warehousing companies and shipping carriers are putting in place heavy peak season surcharges that will affect how much money an online seller or importer pays to send their good to the end customer.
So, what is my recommendation? As somebody with an inside view of the problem, I see shortages and shipping delays as a guarantee rather than a possibility. I expect this year to be worse than last year in terms of delays. Because of this I highly recommend completing your Christmas shopping before Thanksgiving. Christmas shopping the week after Halloween may feel uncomfortable to many consumers, but it may be the only way to guarantee that you not only get the product you want, but that you have it in time to give to somebody else for Christmas. There is no guarantee as to what products will be affected by future stockouts and shortages as well as no guarantee on what gifts will be delayed in the mail. As pressures mount for the holiday season, we could see major failings of the US logistics systems and shortages occur in things other than gifts as capacity is moved around to accommodate those who can afford to pay for any available capacity.