Howard Meitiner, managing director with Carl Marks Advisors, explains why the current congestion and challenges being experienced by retail supply chains aren’t going away anytime soon — in fact, they’re likely to permanently change the sector.
As the holiday shopping season gets fully underway, there are likely to be shortages on retail shelves. But Meitiner advises retailers not to take drastic action that would undermine their profitability. “I would encourage them to focus on what they own, and not on what they don’t have,” he says. “If they have depleted inventory, why discount the price?”
There is already ample evidence that this holiday season will be longer than previous ones. Many consumers got the message about supply chain delays and began shopping early, both in physical stores and online. Amazon.com, for one, has already reported record sales. But Meitiner also cautions consumers not to engage in the type of panic buying that would result in the very shortages of essential goods that are rumored to be imminent.
Early action was also seen this year on the part of larger retailers, who in some instances had the resources to charter their own ships and bring cargo in through alternative ports. The same option isn’t available to small and medium-sized sellers. Regardless of retailer size, however, Meitiner sees the current situation as offering the sector a chance to boost profitability. They can avoid the traditional discounting that occurs during the holiday peak, and achieve both higher sell-throughs and higher margins.
Most of all, they need to realize that the current state of affairs signals a permanent change in the way goods are sourced and sold. “I think if anyone believes this is a one-off, they need to rethink their strategy,” Meitiner says.
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