© Dubes Sonego Junior Dreamstime.com
This week, Walmart and other U.S. retailers kicked off the frenzied bargain season with deep discounts on select products.
Normally Black Friday (slated for the end of this week) marks the start of the shopping season, but some players have apparently decided not to wait that long this year.
Depending on where you are located, this can be seen as a bullish approach to an unabated consumer appetite for more products, or as an effort to lengthen the peak shopping season to sell as much as possible before the problems run out. of the supply chain do not interrupt the flow of goods. available for sale.
The outlook for demand is good. Walmart recently adjusted its forecast for same-store sales in U.S. stores for the year upwards to more than 6%. In the third quarter, its store sales increased 9.2% year on year.
The National Retail Federation predicted that sales in November and December would increase between 8.5% and 10.5% from a year ago to reach between $ 843.4 billion and $ 859 billion. Last year, the tally was an 8.2% increase in the last two months of 2019 to reach $ 777.3 billion.
On the parcel carrier side, FedEx recently weighed on forecasts of a 10% increase in holiday package volume this year, which translates to 100 million packages more than two years ago. On Cyber Monday, the integrator plans to process 32 million packages.
This bodes well for high revenues, but also increased costs due to the cascading impact of closed factories in Asia and the scarcity of raw materials and components at higher transportation and storage costs. Importers of clothing and footwear would pay double the amounts they had to pay two years ago. Insurance and transportation costs in this bracket fell from a 3.7% share of product value in 2019 to 6.4%.
Warehouse giant Prologis says warehouse rents are expected to increase by 18-19% this year. For Walmart, rental costs are expected to rise 7% this year to $ 3.28 billion. Transport costs have also risen, not least due to management’s decision to charter a vessel to ensure its imports from Asia go without huge delays.
Labor costs are also rising sharply for the Bentonville retail giant. Walmart hired more than 200,000 workers for stores and warehouses this year to deal with the holiday rush.
The retail giant took a hit on its share value after releasing its third-quarter results, although revenue exceeded analysts’ expectations, rising 4.3% to $ 140.53 billion. News that its gross margin fell 42 basis points over the period caused its shares to fall 2.5%.
One observer warned that Walmart’s margin could drop between 10 and 30 basis points in the fourth quarter due to supply chain issues or high costs.
Target announced a drop in its operating margin in the third quarter to 7.8%, from 8.5% a year earlier. Its gross margin rate fell from 30.6% to 28.0%, largely due to rising costs of goods, freight and supply chain.
Amazon is also not immune to increasing cost pressure. He cautioned against higher costs during the holiday period.
Presumably, this was one of the reasons for management’s decision to increase fees for its clients as of January 18. In his message to customers, he said that so far it has absorbed billions of dollars in higher costs on their behalf while investing in its delivery network to ensure smooth flows.
Overall, the higher fees will hit merchants who use the Fulfillment by Amazon (FBA) service.
“We will adjust the FBA fulfillment fee to partially offset the higher ongoing operating costs we face going forward,” Amazon told them.
On average, expenses increase by 5.2%. Amazon is increasing monthly off-peak storage fees as well as withdrawal and disposal fees, and it will introduce a tiered pricing structure for long-term storage and low pricing for large, standard-size products.
Retailers are looking to raise prices to offset higher transportation costs and lost sales, according to a report, fearing a shortage of inventory in the coming weeks.
A survey of small business owners released Nov. 15 by Digital.com found that 53% of respondents expected stockouts, with 48% believing their inventory would be 20-50% lower. The survey says 32% of grocery stores expected inventory to drop 60% or more, and 22% said they would increase prices by 50% or more to make up for that.