Keewa Nurullah's Chicago-based children's boutique, Kido, has tripled its revenue since the start of the pandemic. Foot traffic is up in her store, and online sales are strong. But this holiday season--with its 30-year-high inflation rates, supply-chain bottlenecks, and labor shortages--is clouding revenue projections. Her primary pain point has been wholesale purchasing; with products unavailable, her shelves aren't as full as she'd like. "Inventory is so much less than last year," she says.
The robust retail season experts have predicted has already begun, with more than half of consumers shopping before Thanksgiving. "There will be 'revenge shopping.' People who have been imprisoned in their homes will show up to shop. The crowds are going to expand. It's going to be a very crazy holiday," says Mark A. Cohen, director of retail studies at Columbia Business School and former CEO of Sears Canada.
Nearly half of American small businesses have experienced domestic supplier delays, and 20 percent have experienced foreign supplier delays recently, according to the U.S. Census Bureau's Small Business Pulse survey. And now, even companies that have prepared after experiencing the rush of orders over the past year-plus find themselves facing an entirely new slate of production issues.
Andres Modak, the co-founder and co-CEO of Snowe Home, a direct-to-consumer home-wares startup based in New York City, says while he's found significant benefits to managing his own supply chain, the year's unexpected turns have taken a wide-ranging toll on supply. For instance, producing the company's bedding from ethically sourced down feathers--which are a by-product of duck for human consumption--was almost impossible after restaurants throughout Europe were closed for months.
Even those not expecting shortages, such as New York City-based DTC bedding and home goods startup Brooklinen, have pain points. Rich Fulop, the company's co-founder and CEO, says when the Suez Canal was blocked earlier in the year, he began stocking up on inventory. That has helped the company prepare for the holiday season, but the inflated cargo-ship costs caused Brooklinen's margins to take a hit. Now the company, still eager to meet customers' expectations, is running Black Friday sales, which will ding margins even further. "The changing timelines for production and transit have put a very, very complicated spin on managing cash flow," Fulop says.
Domestic transit also has posed problems for Fulop, who says that space on trucks to transport goods from Brooklinen's Las Vegas factory is actually more scarce than on shipping containers. Modak, too, says odd snags, such as a wood-pallet shortage, have slowed movement of his products within the U.S.
Strategies for handling the crisis
Since they're encountering so many different causes and types of supply-chain problems, small businesses are employing a diversity of strategies to cope. Kido's Nurullah, for example, is sourcing domestically new products from emerging designers: "We've tried to find substitutions, or look to Etsy or Instagram for smaller toymakers and artisans in the U.S. to try to fill in those holes," she says. Here are some additional strategies experts and founders suggest for businesses owners dealing with such issues this holiday season.
Overcommunicate with customers:
"There are some things you can solve with expectation management. Set the right promises and communicate them to your customers, especially when you are wrong or a delivery date is moving. Don't leave customers standing in the dark. For a young brand that's something you absolutely don't want to do."
--Tobias Buxhoidt, CEO and founder of parcelLab, a U.S.- and Europe-based customer-experience company that works with brands such as Ikea and H&M
Put in the work, and ask for help:
"The most highly organized and prepared businesses will manage their affairs reasonably if not well, and their customers will be reasonably satisfied. Badly managed and led stores and organizations are going to continue to suffer. But with the labor shortage, stakeholders of the business are going to put in more hours than they ever thought they'd need to. They might have to lean on family and friends more."
--Mark A. Cohen, director of retail studies, Columbia Business School
Shape demand yourself:
"I'm incredulous about companies that think they are going to get their hands on inventory over the next month. Sell what you have! It's what Dell Computers did; they had a dynamic pricing model based on what they had. They were directing your demand. Of course, if it's not what your customers are looking for, you might have some education to do."
--Thomas Goldsby, professor and chair in logistics in the University of Tennessee's supply-chain management department
Create new supplier relationships:
"Be nimble and flexible--look to independent makers and women makers, Black-owned businesses, people who may have been shut out and have stock, and maybe create some new relationships."
--Keewa Nurullah, owner of Chicago kids' boutique Kido
Take a page from successful Kickstarter projects' playbooks:
"If your product isn't in the U.S. yet, brands can do a backordering process--if you create enough certainty and trust around it. You can make that sale and book the revenue even if the product is not even built yet. But to do it well, keep the customers in frequent communication. The worst thing those campaigns can do is go dark. Keep engaging proactively, even when the ship date is pushed out."
--Tobias Buxhoidt, parcelLab