The pandemic has affected all corners of the retail market, but recent supply chain disruptions created unprecedented challenges for brands and their customers. Of the retail segments most affected, consumer electronics reached a standstill in early 2020 due to a significant shortage of components.
As we progress further into the digital era, electronics are becoming integral to our society while the demand among consumers is ever-growing. However, rapid innovation means new and unique challenges for the market.
Getting the latest technology in the hands of consumers requires a supply chain with fast sourcing, production, and delivery.
It’s been nearly two years since countries around the globe went into lockdown for the first time, but the retail market continues to feel an impact. Consumers are eager to spend, the price of electronics is high, but supply remains inadequate.
China is a centerpiece of recent disruptions for two reasons—first, the country is the largest producer and exporter of consumer electronics in the world. And second, China was first to experience a COVID outbreak back in December 2019. As a result, travel restrictions, mask mandates, and lockdowns forced production facilities to shut down.
According to supply chain expert Gary Newbury, supply chain disruptions start at production factories—many of which continue to operate at limited capacity. Compounded by transportation and capacity shortages, consumer electronics are not reaching retailers and their customers as quickly as they should.
Jason Stuckey, General Manager of Linnworks, continued this sentiment by explaining: “The supply chain is an assembly-line that, ideally, should never be paused… Shutdowns created a catastrophic series of events that we will be feeling for a number of years.”
No doubt companies are ready to ramp up production after an almost two-year slowdown—unfortunately, workers are reluctant to retail jobs with low pay and unreliable hours.
In fact, 4.4 million workers in the US quit their jobs in September 2021, equating to 3% of the nation’s workforce. Dubbed as the “Great Resignation,” many retailers and suppliers are left with an either understaffed or undertrained labor force unable to mitigate supply chain losses.
Bob Phibbs, a retail training expert and small business consultant, argues supply chain deficits aren’t the only reason retailers are feeling these pain points.
“Our supply chain problems have exposed how little training retailers have given employees,” said Phibbs. “If a consumer is met with, ‘We’re out of stock,’ they’ll still spend that money somewhere maybe even not on electronics.”
COVID-19 restrictions only worsened unrelated shipping delays, disasters, and rising material costs. In March 2021, a Suez Canal blockage held $57 billion of goods hostage as cargo ships waited for the blockage to clear or reroute.
Not two months later, China’s Yantian Port, which is responsible for over 90% of the globe's exports, partially shut down due to positive COVID tests from crew members. The port did reopen, but not after 23,000 containers overflowed capacity and caused delays still felt six months later.
The materials within these shipping containers have also risen substantially. From aluminum to copper to polyurethane, the prices of electronics components are up by 40%.
“For the last few quarters, the troubles have been on the shipping side, especially with raw materials for assembly, and the delivery of goods to the countries where they are to be sold,” said Stuckey.
Heading into 2022, technology companies are working hard to implement solutions that alleviate supply chain pains.
Practically, there are four distinct measures retailers must take in order to combat these challenges: harness data, set limits, optimize warehouses, and communicate with customers.
Shep Hyken, a customer service and experience expert, argues that maintaining an open dialogue is key to meeting customer’s needs.
“While the delays are still eminent, the ongoing flow of information can relieve anxiety and give the consumer a sense of control,” he said. “The communication must be continuous, it must express empathy, and must make the customer feel that company communication is key.”
No matter, these solutions will not solve supply chain delays and retailers must be able to adapt and offer consumers alternative solutions when products aren’t readily available.
To learn more about how retailers are navigating ongoing supply chain disruptions, download RETHINK Retail’s full report.
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