Black Friday Will Look Different This Year Due to Erratic Shifts in Consumer Demand
November 2, 2021
Lately, we’ve all felt the effects of the recent supply chain troubles. Whether it’s encountering empty shelves at the grocery store or having to wait twice as long for our packages to be delivered, supply chain woes have been at the top of most people’s problem lists. With the holiday season looming, the question on everyone’s minds is how long will it take for our supply chains to catch up to the shifts in demand we’ve experienced due to the pandemic?
According to LSU Stephenson Department of Entrepreneurship and Information Systems Instructor Jennifer Henderson, we’ve been subjected to a perfect storm of circumstances over the past couple of years that successfully crippled our supply chains. First and foremost, we’ve experienced erratic shifts in consumer demand for products, leading to trickle-down effects in the supply chains. “When we went into lockdown, people shopped in ways we wouldn’t have previously shopped. Adults were now working from home and children were being schooled at home, so we started needing different products,” said Henderson. In addition, the stimulus payments led consumers to purchase uncommon items.
Along with different consumer demands, changes in labor also affected supply chains. As we know, the COVID-19 pandemic brought mass workforce layoffs and voluntary resignations. “Now, as everything is opening back up, people’s thoughts about work have changed. They have legitimate health concerns about returning to the office and are simply evaluating their work/life balance more closely,” commented Henderson. Unemployment benefits that were distributed also are giving people a little bit of a financial cushion to where everyone isn’t rushing back to work.
These factors worked together to create a perfect storm and escalate the bullwhip effect, explaining how small changes in demand for certain goods can create huge disruptions, causing a ripple throughout supply chains. “Warehouse workers, truck drivers, and shipping companies -- they are all struggling to keep up with these erratic demand patterns that we’ve seen over the past couple of years. The bullwhip effect has always been an element of supply chains, but over the last two years, we’ve seen a lot of factors make it worse, mostly due to the pandemic,” explained Henderson.
This upcoming holiday season will add a lot of stress to an already crippled supply chain. “The biggest piece of advice for people who want to shop online from big box stores is to shop now! If something is in stock now, there is no guarantee that it will be in stock weeks from now. If things are in stock at that time, there is a possibility that the prices will have increased. Start your shopping early, but also have a backup plan,” commented Henderson.
The more demand and less supply we have, the more people can charge for products and services. A solid plan for holiday shopping this season includes shopping at local small businesses and firms but understand that the prices we’ll see will be inflated. “Shipping costs are anywhere from 25-50% higher than what they were a year ago. These local businesses are having the inflated shipping costs passed on to them, and most businesses won’t eat those costs; they will be passed on to the consumer in the form of higher prices,” said Henderson. Shopping at small businesses isn’t just a way to make sure gifts get here on time, but it’s also a way to help make sure these small businesses stay afloat. Just be aware that any increases in price are a direct result of the increase in costs that the business owner is seeing now.
Consumers will especially see these inflated prices with electronics. “We are still in a computer chip shortage, and chips are in various things like watches, fridges, and vehicles. Manufacturers can’t make these chips fast enough. Demand for electronics skyrocketed when people started working from home and kids were schooled at home. We saw big spikes for PCs, tablets, and even gaming devices,” explained Henderson. Couple that with the demand that we are seeing for cars now that people are returning to their normal lives after the pandemic, and there’s just not enough supply. Consumers should be patient but consider alternatives as well.
For those consumers that are avid Black Friday shoppers, get ready to experience a whole different type of shopping event. First, sales have begun earlier than ever this year, with retailers like Best Buy, Amazon, and Wal-Mart starting promotions in October. “The draw for Black Friday this year might not be who has the best deals, but who has the items in stock for purchase. With shipping costs so high, retailers truly can’t reduce prices like they have in the past. There will be more smaller sales and less slashing of prices that we’ve seen in the past,” commented Henderson. Henderson also thinks that the few bigger sales offered will be in a smaller window of time. “In the past, we experienced true doorbusters where you had to get to the store very early, and there was a limited amount of time for the deal. This is where all the larger discounts will be this year; no more all-day blowout sales,” described Henderson.
So, how long will it take for our global supply chains to catch up to demand? Even though it’s difficult to predict, Henderson said that supply chain experts expect this chaos and inflation to last through at least 2022, but she believes the market will correct itself at some point in the next year or two. We’ve developed truly global supply chains that are mostly invisible to the everyday consumer. However, this holiday season will underscore in a tangible way how far these supply chains stretch. Global supply chains require such predictability and precision that it will take time to get back to the conditions we are accustomed to. Until then, the only way to stay on Santa’s nice list during the holidays is to shop early!
E. J. Ourso College of Business