There are lots of media reports of the economy struggle this Christmas, with shopping and shipping difficulties. So what is happening, why, and how will it impact you?
In 2021, and leading into 2022, we have another fundamental change brought about by the pandemic – supply chain problems. The downside of a global supply chain is that shops can’t sell what they don’t have. Car manufacturers can’t assemble a car from parts they don’t have.
One particular problem is the supply of shipping containers. In 2008 there was a glut of shipping containers and they were plentiful and cheap. Production was reduced, factories were moved onto other products. Now there is a shortage of containers and prices have gone through the roof.
How Shipping Works
This was then exacerbated by how shipping businesses operate. Normally they only send full containers back and forth. The pandemic has meant empty containers have stockpiled in the EU or UK or USA…and to compensate for that, the cost of sending empty containers back to China has been added to the cost of shipping full ones.
Just to make it worse, ports are working over capacity and ships are often waiting to dock and load or unload. The cost of sitting and waiting is now adding to the problem. Ships are taking longer to do a return trip and so shipping costs go up again. As the ships take longer, it means fewer trips can be made by the finite number of ships – which means fewer products making the journey and being available for sale.
How it impacts your pocket
Supply and demand means prices have gone up anyway. Container companies increase their price. Shipping companies increase their price … and the end consumer ends up having to pay for it all.
So, even if the factory in China can make your Christmas tree ornament, they might not be able to ship it. If they can ship it, then the shipping cost will be as much as 10 times what it was pre-pandemic … so your shopping is getting more and more expensive.
This is a huge issue as we approach Christmas 2021 and will likely continue into 2022 and beyond. It might take 3 to 5 years or even longer for prices to come back down to where they have been in previous years.
If you run a small business, what are you doing to make it less of a struggle? Need help? Get in touch!
