However, COVID is not the only factor that needs to be accounted for this year. As the lunar calendar shifts, so do major holidays in China—impacting shipping timelines and means of production. Below are factors that retailers need to be aware of heading into the 2021 holiday season.
An Early Chinese New Year
It is not widely known that the 2022 Chinese New Year starts on February 1st—much earlier than the February 12th date of 2021. This 11-day difference has a major impact on factory production and demand—creating additional points of stress for factories seeking to fulfill Christmas orders before they address the workload and extended time off for workers that Chinese New Year brings.
These stresses mean that the retailer preparing for the holiday season also needs to put in Q1 orders at the very least, two weeks earlier than last year—putting your order under pressure from the holiday and Christmas rush. Even those retailers that are ahead of the game will likely still come up against disruption from Mid-Autumn Day and National Day, which fall in September and early October. These nationally- mandated Chinese holidays give factories even more pressure not to accept new orders, subsequently leading to increased prices.
The Rising Cost of Shipping
Making an early start on purchasing plans is also important because shipping costs are rising due to a number of infrastructure issues. Globally, ports have been experiencing blockage and congestion, making it increasingly difficult to get into the United States which has led to shipping delays and raised prices. Air freight cost has also been impacted due to the decreased number of commercial and cargo flights from China. On top of this, there has been a shortage in shipping containers that makes it even more difficult to ship the product that is available.
China also continues to be hampered by manufacturing labor shortages. This trend began long before COVID, but the pandemic has exacerbated the influence of the problem. Factory jobs are not being filled because these jobs are less appealing to millennials and Generation Z who prefer staying close to their hometown to pursue more flexible opportunities rather than fill the shoes of factory workers who are reaching retirement age.
As ecommerce shows no signs of slowing down and customer expectations are higher than ever, the increased cost of raw material has made it more difficult for retailers to offer expedited shipping at a low cost in the way consumers have become accustomed to. Experts predict that retail, specifically eCommerce, will grow past what we saw in 2020, which means more demand chasing limited manufacturing capacity and logistics capacity.
How Retailers Can Prepare
The key takeaway for supply chain preparation this holiday season is to get organized and to do it quickly. “Just in time” inventory planning is not effective in this current—and likely ongoing—state of manufacturing; smart retailers will move away from this method. With the rise of ecommerce, peak season is lasting longer and retailers will be investing more in forecasting software to better predict purchasing trends to better plan their inventory orders.
Successful retailers and product designers will be the ones who are willing to rethink and be flexible with their designs. As raw materials become less available and more expensive, retailers will need to adapt to survive. Diversifying not only your product offering to account for shipping delays and expectations, but where you are sourcing manufacturing (ie. ordering from China in addition to other countries), is a smart way to avoid bottlenecks that can damper holiday retail success.
Joseph Heller is the CEO and founder of Supplied and The/Studio. After completing college, Joseph lived in China for 10 years and started his career in manufacturing and back-end supply chain, consulting for brands such as JCPenney and Nordstrom. Joseph started The/Studio in 2013 in an effort to provide a modern, high-quality custom manufacturing option for businesses. In 2020, he started Supplied— an all-in-one wholesale marketplace that enables solopreneurs by offering an ecosystem of resources, community, and access—as the effects of COVID-19 became clear. Work culture was changing, people were looking for new income streams and remote work was the new norm. Supplied was built with a mission to create a network of 100 million entrepreneurs through cultivating a wholesale platform for solopreneurs that provides the back-end tools necessary to take the first step in starting a business.