Supply chain crisis: How it’s impacting holiday shopping

High demand, combined with supply chain delays, materials’ shortages and troubles hiring workers, are shrinking the availability of items both online and at stores. As customers get closer to the last minute, physical stores will become a more appealing option for shoppers than waiting around for delivery, analysts expect.

Analysts also believe buy online, pickup in store orders will boom this holiday because of shipping concerns.

Shoppers will lean on curbside pickup “more than ever to give them peace of mind about their holiday purchases” with wait times and items out of stock high on consumers’ minds, said Andrew Lipsman, a retail analyst at market research firm Insider Intelligence.

Retailers will heavily promote pickup as an option for customers on their websites and mobile apps, in marketing emails, and on television to appeal to customers anxious about buying online late in the season, Lipsman expects.

Stores say they have greater control over inventory in stores and through curbside pickup than they do on home delivery orders — meaning it’s less likely there will be a mistake or delay on an order.

“The closer I got [to the holiday], I would absolutely be using the ship to store because that’s going to give more confidence in being able to actually get the thing in time,” Ben Johns, the general merchandising manager for action sports at outdoor equipment retailer REI, said in a recent interview.

When customers order online and pick up their items in stores, products are either in the store already or REI sends them from one of its warehouses using its own trucks. That means REI doesn’t need to rely on third-party delivery carriers it has less control over to deliver to customers’ homes, he said.

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Retailers have an incentive to draw shoppers into their stores.

It’s typically more profitable for retailers to have you shop in person than order to your home because they have to pay expensive last-mile delivery costs. Return rates are also higher for items purchased online, and retailers have to eat the costs for customers’ returns.

Top retailers are pushing customers this year to visit their physical stores to shop or order online and scoop up their items in person.

Kohl’s expects increased demand for pickup orders this year in part because it “eliminates the added stress of waiting for packages to arrive on your doorstep,” Paul Gaffney, Kohl’s chief technology and supply chain officer, said in an email.

Randa Apparel & Accessories, which sells brands such as Levi’s, Tommy Hilfiger, Calvin Klein and others, has shifted a large portion of its advertising spending to push customers to stores, instead of buying online. It’s also directing more of its inventory to stores than e-commerce.

“When inventory is limited, we prefer to drive consumers to in-store purchases over online purchases,” said David Katz, Randa’s chief marketing officer.

Customers purchasing products in stores is more profitable for Randa than online sales, which often come with “very large reverse logistics costs” on return orders. “We’ve paid the tuition for this education, and it was an expensive lesson to learn,” he said.

When shoppers come into stores, they also tend to make impulse purchases or buy related items nearby — belts, for example, near the pants they’re buying. This happens less frequently when buying online.

Overall, Katz said, “the frustration level is lower when you go to mortar and brick, particularly when inventory is limited.”