Fargo, who imports Snowcone from a manufacturer in China, paid $ 1,300 for 500 of them in May. When she wanted to top up her order in August, the same order was $ 9,000.
“I can’t place an order. My margins just don’t support this,” said Fargo, whose business is based in Costa Mesa, California Cre8ive-D normally sells the product on its website and in Hallmark stores. Fargo is looking for manufacturing opportunities in India and Europe to produce a few hundred of the cuddly toys for Christmas, but their hopes are fading. Fargo had considered raising prices for customers to offset their higher costs, but their window of opportunity to secure the toys for the holidays has passed.
“It’s really a tough blow,” she said.
According to Fargo, the problem isn’t customer demand for the toy. “The demand is there. It is the supply.”
Increased spending and myriad supply chain pressures – factory closures, bottlenecks at key ports, and difficulties hiring domestic truckers – are taking their toll on businesses of all sizes entering the crucial vacation spot. They’re especially difficult to navigate for mom-and-pop owners like Fargo. This could have a bigger impact on the products they can take with them while on vacation and the prices they sell them at than larger competitors, supply chain experts say.
“Large retailers have a huge advantage over small businesses because of their size, resources, supplier relationships and systems,” said Patrick Penfield, professor of supply chain management at Syracuse University. “Smaller retailers are really going to have a hard time filling their shelves. It’s going to be a difficult Christmas season for them.”
37 percent of small business owners said supply chain disruptions had a significant impact on their business, while 29 percent had a moderate impact, according to an August survey of 595 companies, a small business lobby group, by the National Federation of Independent Business. A survey of 2,682 small business owners conducted in September by Alignable, a small business social networking company, found that 78% said they had difficulty sourcing goods.
While companies struggle to secure inventory for vacation shoppers, supply chain experts say large companies have the upper hand over smaller competitors at almost every link in the chain. They also have a better ability to absorb higher costs, experts say.
“If you are a Walmart or Target supplier, you will do whatever they ask just because of the volume of your purchases and potential future business opportunities,” said Penfield.
Why small businesses are at a disadvantage
This year, top players will like Walmart (WMT), Cost co (COSTS), target (TGT), Home depot (HD) and others charter their own private ships to bring in goods from overseas, load up additional inventory, and use more expensive air freight to ship goods.
“We’ll be ready for the holidays,” Target CEO Brian Cornell said in an August interview with CNBC. “We have a lot of inventory in the flow at the moment.”
A big advantage for top chains is the size, which is a priority for shippers. Edwin Keh, director of the Hong Kong Research Institute of Textiles and Apparel and former chief operating officer and senior vice president of global purchasing for Walmart, said that large retailers have long-term contracts with shipping companies and sufficient volume to make them major shippers Customers. This is a great advantage when containers get stuck in ports.
“This means that your containers are unloaded first on board and last,” he said in an email. “They also have dedicated agents in the ports to simplify the handling process and save them time.”
Large retailers also often have backup suppliers in different parts of the world to avoid port bottlenecks, he said. “If some of the ports or routes from Asia get too crowded, they can relocate to Central or South America to manufacture their goods and vice versa,” Keh said.
Most independent businesses do not have access to capital to finance costly options like chartering ships, nor do they have replacement suppliers on hand.
The holidays are usually a busy time of year for Simply Naked Candle Co., a boutique candle shop in Conyers, Georgia. But this year the store is struggling to source jars, wax, and fragrances from local suppliers that are essential to making its most sought-after candles, such as Love and Honey, Brown Sugar, and Pineapple Passion.
Co-owner Shante Smith has set up email notifications from essential oil suppliers notifying them when oils she needs are back in stock. She recently got a notification at 2 a.m. and woke up to buy the product locally, fearing it would sell out that morning.
Smith pays $ 5 for glasses that were $ 1.75 last year. A 50-pound box of wax is $ 110 instead of $ 55. Smith used to order these supplies in bulk, but now she’s ordering them piece by piece when they’re running low as she doesn’t have the money to pay for the amount she would normally get.
“If we could afford to order more, we would,” she said. “We have a very, very strict budget.”
Ideally, Smith would buy full pallets of around 1,000 jars, which would allow her to lower the price she pays per unit. “If we could afford to order more, we would,” she said. “We have a very, very strict budget.” But she has to pay more for less because she cannot meet this threshold.
“If I could buy enough pallets at once, it would be a great Christmas for me.”