Tensions in US supply chains divide ‘big box’ and small store

America’s Largest Retailers Are Overtaking supply chain storm While smaller rivals struggle to secure enough supply, earnings announcements and survey data show a widening rift between the biggest store owners and the rest.

Walmart, Home Depot, Lowe’s and Target have all reassured investors in recent days that they are starting the peak season with strong inventories.

Most of the “big box” chains have commented that their size, deep supplier relationships and strong balance sheets have helped them gain market share, albeit at a cost of less than billion dollars. profit rate. But smaller brands paint a more challenging picture of inventory not recovering to pre-pandemic levels.

Kohl’s, a $9 billion department store chain, said “extended shipping times” had left inventory at the end of the third quarter 25% lower than at the same time in 2019, with shortage of women’s clothing. MacyIts inventory is already 15% lower than it was two years ago.

The strong rebound in demand since the Covid-19 lockdown last year has put a strain on all importers, as rising ocean freight costs, port logjams and raw material and vehicle shortages Loading and warehouse space lead to unprecedented supply chain challenges.

But the retailers with the deepest pockets, such as Walmart and Costco, were able to charter their own ships and on-demand air freight products to ensure delivery.

“It’s the kind of yes and no,” says Jennifer Bisceglie, CEO of Interos, a supply chain consulting firm: “The bigger retailers are the haves. They have the ability to get deep into their coffers and begin shipping the goods forward. What isn’t there are small shops, small and medium businesses that are paying attention to their local market. “

The biggest chains can also count on their key suppliers to prioritize them, she added: “If I were to sell to Walmart, would I want them to remember that I was good to them during the 2021 holiday season? are not?”

Henry Jin, an associate professor at the University of Miami, said: “The most difficult retailers are mid-sized retailers that want to compete with larger retailers with similar product mixes. He added: “These are retailers that do not have the financial resources and relationships with third-party logistics companies to have greater control over their incoming logistics and do not have a multi-channel supply base. geographical form.

Nick Mazing, research director at Sentieo, a financial data group, said investors have not penalized shares of smaller retailers but that apparel companies that depend on imports have been hit. hit particularly hard by delayed shipments, said Nick Mazing, research director at Sentieo, the financial data group.

He noted that brands including Steve Madden, Carter’s and Decker’s all reported strong increases in “inventory in transit” in their latest earnings reports.

Independent retailers are feeling more pressure, according to Alignable, a network for small business owners whose poll found small stores are struggling with rising inflation and shortages supply.

The latest survey found that 40% of small US retailers expect to be unable to pay rent in November, up 7 percentage points from October, and more than a quarter said they were at risk. chance to close well in the fourth quarter.

Efforts by major retailers to address supply chain bottlenecks have hit their bottom lines, with shares of Target falling this week after it warned that higher costs were weighing on them. company’s gross profit margin.

TJX said its “vast supplier universe”, the largest in discount retail, has allowed it to keep good stock but added that its shipping costs will increase 80 to 90 points basically for the period from Q3 to Q4 when they pay “significantly above market rate” to secure inventory.

Simon Freakley, chief executive officer of consulting firm AlixPartners, said smaller retailers that have hit the ground running in the pandemic with thinner margins have less of a chance.

“There are a lot of limited options” for smaller companies, he said: “Your only real option is to build regional and local supply chains, which you can’t do quickly. If you’re a struggling business, that puts more pressure on your bottom line, leaving you more vulnerable.”

He predicts that will lead to “more trouble” at the smaller end of the retail sector, after a period in which low interest rates and government support have sustained struggling companies. towels before Covid-19 came out.

“When inflation starts to pick up and borrowing costs start to go up, you’ll see a bunch of companies that aren’t doing so well being dropped or bought out,” he said.

Rapid Ratings’ James Gellert says his team’s assessments of the financial health of retailers show the dichotomy has occurred. While its ratings for the largest chains have rebounded to 2019 levels or beyond, “smaller companies have been in recession at a faster rate”.

For many individual store owners, the challenges are immediate and acute. Katrina Parris, owner of a Harlem gift shop called NiLu, thinks she acted early when she ordered holiday decorations, candles, jewelry and other items in August.

The post-Thanksgiving holiday shopping spree in late November, she said, is often “the time to shine” and is when her sales often peak. This year, however, she received only half of her order and there is no guarantee that the other half will arrive on time.

Bob Amster, principal at Retail Technology Group, an industry consulting firm, said the supply chain crisis could leave small stores in need of more support from Washington. “Unless there is government intervention,” he said, “many of them are really going to suffer and possibly have to close their doors.”

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