U.S. supply chain pressure divides “big boxes” and small stores
America’s largest retailer is weathering the country’s Supply chain storm Earnings announcements and survey data show that smaller competitors are struggling to ensure adequate supply. These data indicate that the differences between the largest store owners and other stores are widening.
Walmart, In recent days, Home Depot, Lowe’s and Target have all assured investors that they have started the peak season with strong inventory levels.
Most “big box” chains commented that their scale, deep supplier relationships and strong balance sheets are helping them gain market share, albeit at the expense of profitability. But smaller brands paint a more challenging picture, that stocks have not returned to pre-pandemic levels.
Kohl’s, a department store chain with a market value of US$9 billion, said that “extended shipping time” made its inventory level at the end of the third quarter 25% lower than the level in the same period in 2019, especially the shortage of women’s clothing. Macy’sInventories are more than 15% below the level of two years ago.
Since the Covid-19 lockdown last year, the surge in demand has made all importers nervous because soaring shipping costs, port congestion, and shortages of materials, truck drivers and warehouse space have caused unprecedented supply chain challenges.
But retailers with the strongest financial resources, such as Wal-Mart and Costco, have been able to rent their own ships and air freight to ensure delivery.
Jennifer Bisceglie, CEO of Interos, a supply chain consulting firm, said: “Some are some, some are not, some are larger retailers. They have the ability to go deep into their vaults and start shipping products forward by air. Poor people It is a small shop, a small and medium enterprise that benefits from the local market.”
The biggest chains can also count on major suppliers to give them priority, she added: “If I sell to Wal-Mart, don’t I want them to remember that my holiday in 2021 is good for them?”
Henry Jin, an associate professor at the University of Miami, said: “The retailers that have the biggest trouble are mid-sized retailers, who are eager to compete with large retailers with similar product portfolios.” “These retailers have neither financial resources nor third-party logistics companies. The relationship influence to better control its inbound logistics, and there is no geographically diversified supply base,” he added.
Nick Mazing, head of research at the financial data group Sentieo, said that investors did not collectively penalize small retailers’ inventory, but clothing companies that rely on imports have been hit particularly hard by delayed shipments.
He pointed out that brands including Steve Madden, Carter’s and Decker’s all reported a sharp increase in “in-transit inventory” in their latest earnings statements.
Alignable, a network of small business owners, said independent retailers are feeling more pressure. The network’s opinion polls show that small shops are struggling with soaring inflation and shortages of supply.
Its latest survey shows that 40% of small US retailers are expected to be unable to pay rent in November, up 7 percentage points from October. More than a quarter of retailers said they are in danger of being permanently closed in the fourth quarter.
Efforts by large retailers to tackle supply chain constraints have eroded their profitability. Target’s stock price fell this week after the company warned that rising costs are affecting its gross profit margin.
TJX stated that its “large supplier field” is the largest in the discount retail industry, allowing it to maintain sufficient inventory, but added that it paid “significantly increased market interest rates” to ensure inventory.
Simon Freakley, chief executive of consulting firm AlixPartners, said that small retailers with lower profit margins have fewer cushions in this pandemic.
For small companies, “the choice is very limited”, he said: “Your only real choice is to establish your regional and local supply chain, which you can not quickly complete. If your business is already in trouble, this will give you The profits put more pressure on you, which makes you more vulnerable.”
He predicted that after low interest rates and government support supported companies that had been struggling before the Covid-19 attack, this would cause the small end of the retail industry to “get even more troubled”.
“As inflation starts to rise and borrowing costs start to rise, you will see many poorly performing companies fail or be acquired,” he said.
James Gellert of Rapid Ratings said that his team’s assessment of the retailer’s financial situation indicated that a disagreement had occurred. Although its rating of the largest chain stores has risen to the level of 2019 or later, “smaller companies are downgrading faster.”
For many individual shopkeepers, the challenge is urgent and acute. Katrina Parris, the owner of a gift shop in Harlem called NiLu, believes she was moving ahead when she ordered holiday decorations, candles, jewelry and other items in August.
She said that the holiday shopping craze after Thanksgiving at the end of November is usually when she “shine-out” and when her annual sales usually peak. However, this year she only received half of her order, and there is no guarantee that the other half will arrive in time.
Bob Amster, head of the retail technology group, an industry consulting firm, said the supply chain crisis may cause small stores to need more support from Washington. “Unless the government intervenes,” he said, “many of them will actually be affected and may even shut down.”