Why You Should Be Holiday Shopping Now. . .Like Right Now
by Kenneth Medford III
I spoke to my mommy a couple of days ago and she told me she was already neck-deep into her Christmas shopping. Now, normally, I might say she’s going a little far on “getting a jump on” her shopping, but I can’t argue with the strategy.
Generally speaking, the earlier you start, the more time you give yourself to spend strategically and pay off any debt you create. You also don’t feel that last-second pressure to run to every mall in a 50-mile radius and fight crowds for stuff. This year comes with a couple of extra wrinkles (as if the last two years haven’t been wrinkled enough) in the way of rising consumer costs, major shipping delays, and a shortage of microchips that are affecting everyone from major corporations down to gamers like me that JUST WANT A PS5. . .but I digress.
To at least attempt to avoid what could be a really rough holiday season, here’s why you should be holiday shopping right now.
(For ways to save more and spend less this holiday season, check out this article.)
Rising Consumer Costs
I love food. I love shopping for it, I love cooking it, and boy do I love eating it. As a proud omnivore, there is very little that I won’t eat honestly. Unfortunately for me, this is going to translate to a bigger hit to my wallet this year. According to the USDA:
“In 2021, food-at-home prices are now expected to increase between 2.5 and 3.5 percent, and food-away-from-home prices are expected to increase between 3.5 and 4.5 percent.”
Basically, whether you’re cooking at home or going out to eat. . .oh who am I kidding, if you’re ordering delivery, prices are rising. This is what economists mean when they say “inflation“. The report continues:
“In 2020, food-at-home prices increased 3.5 percent and food-away-from-home prices 3.4 percent. This convergence was largely driven by a rapid increase in food-at-home prices, while food-away-from-home price inflation remained within 0.2 percentage points of the 2019 inflation rate. The largest price increases were for meat categories: beef and veal prices increased by 9.6 percent, pork prices by 6.3 percent, and poultry prices by 5.6 percent. The only category to decrease in price in 2020 was fresh fruits by 0.8 percent.”
Covid is having consistent, long-reaching effects for consumers.
Now, you may be asking, “What does that have to do with the price of tea in China?” and I would wonder if my grandfather suddenly took over your body. What I’m getting at here is the fact that if your normal, everyday costs for food go up, you’re left with less disposable income to play Santa. Adjusting your budget now might create some wiggle room for you as the holidays approach.
Though Madde does point out some great ways to fight the impact of inflation in this article.
The Current Shipping Crisis
They say that you should spend money on experiences as opposed to material things. Normally, I would wholeheartedly agree. Unfortunately, with travel restrictions, the closure of local businesses across the country, and many either unemployed or under-employed, the material is all we really have when it comes to luxury purchases. That increased demand for knick-knacks big and small could not have come at a worse time for the shipping industry.
Business of Home succinctly puts it like this:
“Why will it take so long [for prices to normalize]? There are three major reasons,’ says journalist Rachel Premack, who has reported extensively on the crisis for Business Insider. “We’re continuing to see a remarkable increase in demand, coupled with a shortage of shipping containers and massive congestion at ports,’ she explains. ‘The reason we’re seeing 2022 as the point when this calms down a bit is that people are expecting that demand will continually decrease as society goes back to normal. Once that happens, ports can work through the existing backlog of containers.”
Basically, there are not enough containers to hold all our stuff. Online shoppers don’t know this when they click “check out”. . The likelihood of this shipping shortage having a major impact on how long it takes your holiday presents to arrive is pretty strong. Couple longer than average wait times with the increase in shipping costs and it’s clear to see that consumers will have to bear a fair amount of the weight while retailers and other businesses struggle to keep up with demand.
It costs more to ship goods
Frieghtos.com gives a look at the staggering freight costs of shipping goods from Asia to the west.
Asia to US prices went unchanged this week, but are still 5X their level a year ago.
Asia to US East Coast rates are still more than $20K/FEU.
At eight times this time last year, Asia to Europe rates are at record levels, but have also remained stable.
Containerized Freight Rates from the Freightos Baltic Index
Asia-US West Coast
Asia-US East Coast
North Europe-US East Coast
* Compared to the corresponding week in 2020
Just like we saw with increases in food costs, this will lead to an increase in the cost of consumer goods that are coming from the east. To cope, you will see businesses have to take the approach CEO Gary Pettitt has taken for the sake of his brand and company:
If you can, getting in orders now may save you from what will likely be either outright higher prices or additional fees. Also, ordering now with slower shipping rates may mean it may take a while to get to you, but you’ll have the time to wait it out.
The Microchip Shortage
As our world becomes one with technology, our reliance on these little black mirrors and magic boxes grows exponentially. If there is anything I’ve learned in my short time on this planet, it is that technology is only awesome when it works. An addendum to that is, technology is only awesome when you can get it. Another far-reaching effect of the global Covid pandemic is a shortage of microchips that are essential to everything from graphics cards to electric toothbrushes. The Las Vegas Review-Journal shows conflicting opinions from various CEOs but confirms that we’re not out of the woods yet.
“The CEO of chipmaker STMicroelectronics, Jean-Marc Chery, said the shortage will likely last at least two years. “Things will improve in 2022 gradually,” Chery said, “but we will return to a normal situation … not before the first half of 2023.”
“James Lewis, senior vice president and director of CSIS’ Strategic Technologies Program, is a bit more optimistic, feeling that, “We’ve probably got about nine, 10 months of this to live through”
What makes this particular issue so devastating is how hard it shakes the entire ladder. Consumers are not the only ones left without. Consumer Reports shows even a company as big as General Motors can’t avoid taking a hit:
“Almost every manufacturer has faced production delays and temporary shutdowns as they wait for the chips they need to finish building cars on the assembly line, with the latest gloomy announcement from General Motors that it would pause production at most of its factories for anywhere from a week to several weeks during the next month or so.”
Popsci.com actually has a quote of Intel CEO Pat Gelsinger speaking directly to many a child’s greatest fears:
“Intel chief Pat Gelsinger predicts it will be a year or two before supply can meet demand, and experts say holiday shopping may not offer the variety and options we’re used to.”
Holiday shopping is going to be more competitive for consumers than retailers
If his prediction rings true, and who better to know than him, we may be in for some very competitive holidays for the next couple years, at least as far as tech is concerned. I strongly suggest anyone looking to pick up graphics cards or next-gen consoles, among other higher-end tech gifts, check out Tom’s Guide. They do a fantastic job of keeping people up-to-date on online and in-store restocks. It will likely still require a bit of luck, but it’s better than flying blind.
As my best friend calculated, there are about five to six checks for the average worker between now and C-Day. Take this heads up and try to make moves early or (and I strongly cosign this idea) start preparing people for late gifts now. Honestly, if they’re complaining about getting something awesome and thoughtful in January instead of December, you might want to consider just buying them a bag of charcoal and call it a day.
P.S. Before finishing this article, I actually did pick up a PS5 thanks to Tom’s Guide! I had to wake up at 4 am, get to Best Buy by 5 am, and wait in line half the time in the rain. . .but it is just a beautiful piece of gaming hardware. Keep searching people!!