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Why Supply Chain Issues May Not Be Such a Grinch for Retail

By Nell McPherson – Updated Dec 6, 2021 at 1:26PM

Key Points

  • Most major retailers have been preparing for potential problems this holiday season for a long time.
  • Some items may be hard to come by, but it’s looking like that will be more the exception than the rule.
  • An upside could be increased foot traffic for physical retail stores.

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Problems in the supply chain are absolutely real, but things don't look totally bleak.

Problems with the supply chain have been a leading news story for months. While reading about everything from major pandemic-induced production delays to record-breaking truck driver shortages, it would be easy to assume that retailers will be left holding the bag this holiday season. But it's starting to look like the supply chain issues -- or at least their impact on holiday shopping -- may have been a bit overblown.

Let's take a look at what some retailers are doing to address those concerns, as well as what the ultimate impact on store shelves -- and commercial real estate investors -- might be.

Two smiling people holiday shopping.

Image source: Getty Images.

Retailers have been busy little elves

Making supply appear limited is one of the oldest tricks in the book for creating urgency and driving up sales. So does that mean it's all a conspiracy? Not really. Production is behind, ports are clogged, shipping containers are becoming scarce, and the need for truck drivers has never been more pressing than right now.

And yet it looks like retailers can  expect to have a very happy holiday shopping season this year. How can that be?

The retailers that have managed to survive the past couple of years have done so with a great deal of planning and strategizing and very few of them have been caught off guard by these supply chain problems. They saw the situation coming a mile away and have had the foresight to prepare for it.

Large retailers have been ordering ahead and preparing for up to a year in anticipation that things could get dicey this holiday season. Several of them have also been tackling the problem head-on by chartering ships and planes and buying their own shipping containers.  They've all been doing what they have to do to make this holiday season bright, and it looks like it's about to pay off -- big time.

CNN Business just reported that Walmart, America's largest retailer and a generally reliable indicator of what investors might expect to see from other retailers, has continued experiencing strong sales growth despite supply chain warnings. The company also raised its annual sales and profit growth targets, which suggests that the retailer foresees a happy holiday season. 

Most holiday shelves are far from bare

It is still possible that certain items won't have the supply to meet demand, so shopping early is still good advice. But from a retail investor perspective, it seems likely that shoppers who can't find one specific gift they wanted will just buy something else and so retailers won't suffer.

A nice little holiday bonus for commercial real estate investors is that lingering supply chain and shipping concerns will likely encourage an increasing number of shoppers to hit the stores in person as people will want to get those gifts in their hands and off their minds as soon as possible.

So, between the sense of urgency created by supply chain issues and the fact that they seem unlikely to harm retailers much this holiday shopping season, it looks like investors in retail will get to have their fruitcake and eat it, too.

Nell McPherson owns shares of Walmart Inc. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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