Walmart and Target will collect cash this Christmas. Small businesses may not be so lucky
But this year’s Small Business Saturday promotion is unlikely to change the fortunes of US independent stores, which are already significantly different from their larger rivals.
With smaller retailers closing and travel and entertainment spending at a standstill, these large chains boomed as Americans stocked up on groceries, basic household items, office supplies and furniture. loss during the stay at home.
As independent stores begin to reopen in the second half of 2020 and early 2021, they face a new set of challenges: production shutdowns and shortages of raw materials make it harder to buy and keep stock. , shipping and handling costs are also higher. as well as difficulties in recruiting and retaining workers.
All retailers have struggled with these issues this year. But the challenges have hit independent stores harder, experts say. Mom-and-pop owners are often lowest on the priority lists of manufacturers and shipping companies when stock shortages or delays arise.
For example, Home Depot said last week that some suppliers with limited supplies told the chain they were prioritizing the company over others: “‘We can’t serve the industry, so we wanted to focus on the best partner,” Vendors said, Home Depot CEO Edward Decker recalled on a call with analysts last week.
Small stores also often lack the financial flexibility to manage higher costs and keep prices lower for customers, unlike large competitors who can utilize their size and abundant resources. them to absorb the cost increase.
Michael Baker, retail analyst at DA Davidson, said: “Larger retailers will be more likely to solve supply chain problems and better source stock than smaller retailers. without opportunity,” Michael Baker, a retail analyst at DA Davidson, said in a note to clients last week.
Gap between big and small retailers
Sales are expected to boom this holiday season, but small stores may miss out as shoppers turn to cheaper chains with more merchandise on their shelves.
Retail sales in November and December will grow 8.5% to 10.5% this year compared to the 2020 holiday season, reaching a record $859 billion, the National Retail Federation predicts. , an industry trade group.
Large-chain inventories have skyrocketed ahead of the holiday season thanks in part to tactics that are too costly for most store owners – such as chartering and air freight products from overseas. USA. Major retailers are also relying on their extensive supplier networks to mitigate raw material shortages and factory shutdowns. Small shops usually only have a handful of vendors, so if something goes wrong with one of them, they’re stuck.
The retail giant’s CEO John Mulligan said in an earnings call last week, Target is “well-positioned” for key holiday products like toys and gifts. This will help Target “continue to capture market share as we go through the holiday season.”
The retail giants are pulling out all stops this holiday to stock up on merchandise, offer discounts to customers, and staff stores and warehouses. But independent stores are struggling to keep up.
According to a recent survey by the National Federation of Independent Business, a lobbying group for small businesses, 39% of small business owners reported in October that supply chain disruptions have had a significant impact. to their business. Another 29% reported a moderate impact. Only 10% said there was no impact from supply chain disruptions.
“Small business owners are trying to capitalize on the current rate of economic growth but remain pessimistic about business conditions for the foreseeable future,” NFIB chief economist Bill Dunkelberg said in a statement.
The shortage of workers for unfilled jobs and shortages of inventory, he said, are among the top challenges for small businesses and will “continue to be a problem during the holiday season.” .”
That means, by the end of the holiday season, it’s likely that the gap between America’s biggest stores and its smallest will stretch even further.