Supply Chain Issues, Inflation, and Revenge Shopping: 2021 Holiday Shopping with LSU Marketing Professor Dan Rice
November 22, 2021
BATON ROUGE - It’s been nearly two years since the start of the COVID-19 pandemic, and this year’s holiday shopping is feeling the impacts of the pandemic. From supply chain disruptions, shipping delays and price inflation, LSU Marketing Professor Dan Rice said supply is on the lighter side while at the same time, many consumers are ready to shop and spend this year.
What do you expect for this year’s holiday shopping, especially in light of supply
chain issues and inflation?
Dan Rice: This is going to be an interesting year. We have a lot of price inflation, actually more than any time since 1990. The price pressure may make it nearly impossible to get deals in certain sectors. For example, the Labor Department has shown price increases over the last year of:
- Rental cars: 42.9%
- Gas: 42.1%
- Used cars: 24.4%
- Hotels: 18%
- TVs: 12.7%
- Furniture: 11.2%
- Meats, poultry, fish and eggs: 10.5%
- New cars: 8.7%
- Appliances: 7.1%
- Electricity: 5.2%
- Restaurant prices: 4.7%
- Rent: 2.9%
So, it might be hard to get a great deal on car rentals or hotel rooms for a trip, or a used car. Likewise certain electronics like televisions and those affected by the chip shortage and distribution issues may also see higher prices given increasing demand and dwindling supply. If you start to look at stores these days, many have shelves that are a bit leaner than normal. In fact, one sector that’s really having difficulty with inventory are the discount fashion stores like TJ MAXX, Ross and Marshalls. The big brands are making a concerted effort to sell less stock to these outlets in part due to demand and product shortages in the more premium-priced retail partners like Macy’s or Saks Fifth Avenue.
In an October press release, the National Retail Federation, or NRF, predicted that holiday shopping will reach
record heights. What do you expect to see nationwide and here in Louisiana?
Rice: There’s been a huge growth in online sales over the pandemic, and it was far outpacing brick and mortar sales growth percentage-wise for the past few years. The current environment is likely to exacerbate that. We also might see what has been termed “revenge shopping,” where people have a pent-up need to spend money on things they didn’t buy or need during the lockdowns, but could have more use for now that things are starting to go back toward some form of normal (e.g., business attire for in-person meetings, etc.) and other fun things to recover emotionally from the disruptions. Coupled with the fact that many American families, according to the NRF, are doing very well financially and that many of the bargain outlets are having a hard time getting normal stock, it could push spending up even for roughly the same number of items. That however is on a national scale. In Louisiana, we have a lot of people who are still struggling, in some cases literally, to put a roof over their heads with all the fallout from the storms this year. For those families, presumably spending will be much more on necessities and much less on gifts. So while the spending as a national average is expected to skyrocket, there are segments where that will likely not be true.
Like last year, many big box stores are announcing sales starting earlier. But with
delays and supply chain issues, will this end up helping or hurting the consumer?
Rice: Some of the issues certainly come from supply chain disruptions including raw materials price increases, fuel price increases, worker wage increases and delays that cost companies. Additionally, many sectors are really struggling to hire enough workers to handle demand, which is leading to higher wage requirements for companies to retain workers, which ultimately often gets passed onto the consumer. It’s hard to make a blanket statement about deals and discounts. A common misconception is that the best deals on everything happen on Black Friday. Some might well be the best prices, but others won’t be. They’ll simply be labeled “sale” with relatively minor discounts. It really all comes down to a specific offer. You should try to be a knowledgeable consumer and do some comparisons before making your purchase decisions. One of the big impacts this year might be stock outs, and this could give early shoppers an advantage in selection.
With COVID cases decreasing and mask mandates lifting, do you expect people to shop
primarily online or in person?
Rice: I think this too is really dependent on where you are. As we see large drops in cases here, ironically, many other areas of the country and world are seeing large upticks in cases. So, here we might see relatively more people shopping in-person, and areas with surges might see relatively less. I do think over time there’s going to be a continuing general trend that has been accelerated by the pandemic to online purchases. That said, certain in-store only deals may still bring people into the physical stores.
In our November 2020 story you said, “There are a lot of good signs, but there are also a lot of signs for caution.”
Were you right to feel cautious? Were your expectations met?
Rice: People are starting to go out again, and some of the areas that were hit the hardest, like restaurants and accommodation, have had the strongest rebound. Personal consumption expenditure is forecasted to rise over 8%, and it dropped by nearly 4% in 2020. So, it seems like there was some reason to be cautious last year, especially in the industries hit hardest by the pandemic. This year, with generally strong spending, shoppers are eager to get back out and spend, and enjoy things that maybe they couldn’t during the pandemic. The interesting issue now will be how much the ongoing supply chain issues may impact sales or potentially limit growth. Even if it ends up being fantastic for sales, it’s possible that it could have been even better.
How has COVID-19 changed the way people shop and do you think those changes are permanent?
Rice: It accelerated the transition to online platforms, easy deliveries, and innovative interactions. As a friend and frequent digital marketing guest lecturer Jared Broussard of Blinkjar Media told my class, “It condensed 10 years of change into three months.” The companies that could “pivot” to offer services that were in-demand thrived, and many others that couldn’t adapt ceased to be. I think many of the trends are here to stay, particularly as related to internet commerce.
Anything else you would like to add?
Rice: Always do your homework and research a product, particularly a big purchase, before you buy. Just because a store says something is on sale around Black Friday doesn’t mean it’s the lowest price of the year, or even a particularly good sale. Be sure you have an understanding of the kind of deal you are getting before you buy, especially this year. Don’t get caught up in revenge spending to make up for lost time in the pandemic.