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Will Santa Clause Really Come to Town?

Christmas is right around the corner yet many still wonder whether they will be able to make all their wishes come true. Will disrupted supply chains affect Christmas trade again this year? Which items could it concern? In this article, we provide answers to these and other questions.

Will this year’s trade trend continue into Christmas? Only time will tell.
Will this year’s trade trend continue into Christmas? Only time will tell.

The pandemic and global semiconductor shortages have shaken up global supply chains. It was almost inevitable that trade during last year’s Christmas period suffered as a consequence. Over 80 percent of retailers in Germany couldn’t get their hands on all the goods they had ordered in December 2021 – with the electronics sector being particularly hard hit. But how will things look this year?

What’s the Hold Up? Bullwhips and Lockdowns to Blame?

This year, economic experts expect that popular household items and electronics will, like last year, be delayed or not delivered at all in some cases – even though the situation has eased considerably. Despite small positive indications, supply chains are still adjusting to a new phase in the post-pandemic environment. Take port congestion and the threat of lockdowns in many of China’s leading manufacturing cities, for example.

That said, many retailers’ warehouses are still well stocked – some even overstocked. But in the run-up to Christmas, supply chain disruption could mean that it will take too long to deliver reorders to satisfy demand.

Another reason for availability problems is ongoing bottlenecks in the global semiconductor market, which continue to slow down production. A number of factors could mean these issues are sticking around for a little longer yet; the main one being that U.S. and EU subsidies for production are not yet in place.

The bullwhip effect may or may not play a role this year. A phenomenon caused by demand fluctuations in multi-tier supply chains often leads to retailers overestimating the demand for a product and over-ordering. Wholesalers, in turn, also order a larger quantity to avoid supply bottlenecks, meaning manufacturers produce more of the goods than necessary. Production and storage capacity is wasted as a result, and other products may not be manufactured and stored in sufficient quantities.

The Logistics Industry in Transit-ion

Long before the pandemic, it was clear that e-commerce is the future of retail. In a study by German digital service advisor, Bitkom, over 60 percent of respondents (one thousand German citizens over 16 years of age) planned to buy all or most of their gifts online last year. The logistics and transportation industry is feeling the effects of this again this year. Although it is experiencing a boom, it is also facing enormous challenges due to the lack of qualified personnel. HGV drivers in particular are currently hard to find. If the number of orders rises sharply, delivery problems may therefore arise here as well. But two factors contradict the assumption that there could also be bottlenecks in Christmas trade this year.

“Rising prices for gas, food, and other basics are emptying consumer wallets. Plus, soaring interest rates on credit cards, mortgages, and car loans erode holiday shopping budgets.”

Inflation: The Grinch Who Stole Christmas?

In Germany, the inflation rate climbed to a record high of 10.4 percent in October. As a result, economy experts in the country expect people to spend less money on Christmas presents this year. This has also been confirmed by a survey conducted by the Federation of German Consumer Organisations (Verbraucherzentrale): 56 percent of respondents said that they would spend less on the whole because of rising prices. Until things change, consumers are particularly keen to save on things like new electrical appliances and clothing.

This is also likely to impact the Christmas shopping season, with 38 percent planning to spend less money on Christmas presents. In other words: If demand is lower at Christmas this year, there will very likely be no supply bottlenecks or delays at all, and supply can be met.

It is impossible to say with any certainty whether there will be any notable supply problems for popular Christmas gifts in 2022. There are too many complex factors involved. What is clear, however, is that the situation will be much more relaxed than last year.


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