Last year, shipping companies were overwhelmed by a surge of deliveries during the holiday season as consumers shifted from in-store shopping to online purchases while the coronavirus pandemic raged on. As a result, many customers saw their purchases delayed.
This year, shoppers could be in for similar hiccups, but not just due to local shipping issues. There are already signs that consumer goods may be in short supply for the holidays due to international issues on the shipping front, and that's something retailers -- and real estate investors -- will need to gear up for.
Things are already looking bleak
Consumers could end up less than thrilled this holiday season when the goods they want to buy are out of stock or backordered. And retailers could suffer a big loss in revenue when they can't supply customers with the goods they desire.
The reason for all of this impending mayhem stems from shipping delays due to flooding issues in Europe and China. In both countries, massive floods have damaged railways and other transportation systems that are integral to the ongoing delivery of goods. And experts agree that while the holidays are still several months away, the delays that are being experienced thus far could easily trickle into late November and December.
In addition to flooding issues, factories and ports in different parts of Asia have been forced to shutter due to ongoing COVID-19 outbreaks. And based on current projections, it's unlikely that supply chains will manage to catch up in time for the holiday boom.
The result? Holiday shoppers will likely be looking at higher prices and fewer discounts this year. They may also struggle to get their hands on the items that top their wish lists.
All of this could really threaten retailers at a time when they can't afford to lose out on any more revenue. Many retailers saw their revenue take a hit during the pandemic, when forced store closures, COVID-related concerns, and economic fears caused consumers to scale back their spending.
This year is being touted as retailers' comeback year. The economy is stronger, vaccines make it less concerning for shoppers to enter a store, and stimulus checks and extra payments from enhancements like the boosted Child Tax Credit are giving consumers more spending power than they've had going into previous holiday seasons. But retailers may not manage to benefit from any of that if they can't provide customers with the goods they're searching for. In fact, retailers could see their revenue take a hit as frustrated consumers seek to replace physical gifts with experiences instead.
If retailers don't benefit from a holiday revenue surge, some may have no choice but to think about closing stores with less solid performance. And that could, in turn, hurt investors in shopping center and mall REITs, or real estate investment trusts.
Now the good news is that retailers can try taking steps in the coming weeks to source goods more locally in an effort to fill their shelves in time for the holiday season. But whether they can do so cost-effectively is yet to be determined. And so consumers and investors alike will need to prepare for the fact that this year's holiday shopping experience may not be the smoothest.