In the summer months, trade finance providers tend to see a rise in utilization from retailers and their vendors looking for a working capital boost for holiday season inventory. This year, amidst global supply chain disarray, uneasy retailers are looking to get an earlier start on procuring goods to stock shelves and warehouses.
Importers are up against all kinds of challenges this time around: container shortages, shifting consumer demand during a pandemic, labor shortages, crowded ports, increased freight costs and record-slow shipping speeds, to name a few.
Stores that carried about one-and-a-half months’ worth of stock before the pandemic had their inventories to sales ratio fall to just 1.1 by March, the lowest level since at least 1992, US Census Bureau data show (Financial Times).
To combat import bottlenecks, logistics companies report that holiday procurement activity is on average happening two months early this year.
“This holiday season it’s all about inventory,” said Mike Steup, CEO of snakebyte Group, a consumer electronics and video game accessories company with licensing agreements with Disney and Microsoft. “We expect to see gaming and toy products flying off the shelves, with many products sold out weeks before the holidays.”
With an extraordinarily high demand for consumer electronics this year, giftable products like snakebyte Group’s gaming chairs, Pebble Gear™ tablets for children and Honeycomb Aeronautical flight simulation are expected to see soaring sales.
Snakebyte can meet the seasonal spike in consumer demand in part because of their own supply chain finance program with global trade finance provider, Harbor. The electronics business, with operations in Germany, United States, United Kingdom and Hong Kong procures its products from China.
With Harbor’s program in place, the Chinese suppliers are paid at shipment and snakebyte is granted four months before a payment is due to Harbor, freeing up working capital which can be used to generate inventory and deliver to retailers, e-commerce and direct to consumers.
Although preparations are being made up and down supply chains to ready for holiday shopping, consumers can still expect to encounter empty shelves and out-of-stock messages from retailers.
“This year, last minute holiday shopping isn’t a great strategy,” said Steup.
It’s not projected that supply chains will get back on track until after the Chinese New Year in February 2022.