Retailers spared supply-side Grinch
Bay Area stores well stocked, but economy may slow shoppers
Cardboard boxes of holiday merchandise — gifts, toys, decorations — fill every square inch of Katie Dhuey and Dan Melin’s San Jose home, consuming both spare bedrooms, the garage and the crawl space. Every day when they go to work at Affordable Treasures, their
Los Gatos store, they load boxes into their cars to unpack onto its shelves.
The couple were determined that supply chain woes wouldn’t wallop their store, which sells party items, decor, gifts, novelties, toys and crafts. They placed their holiday orders back in January — and when the deluge of goods arrived early, they stored them at their own home and the Soquel (Santa Cruz County) home of Melin’s parents, who founded the store in 1986 and sold it to the younger couple in 2000.
“We’ve spent the entire year trying to make sure we don’t get into the same situation as last year, which was a revolving mess of supply chain disasters,” Dhuey said. “We always have to place seasonal orders early, but we placed them even earlier and took shipments earlier. We probably overbought a bit because we were so paranoid.”
In the end, the supply chain didn’t cause any problems, except for an order of Christmas crackers (festive paper tubes containing small gifts) stuck in customs.
Retailers big and small are eager to assure customers that supply chain snafus won’t snarl their holiday shopping, unlike last year when pandemic problems led to some empty shelves during the crucial season. The one exception: Some chips for high-end electronics products may be in short supply. Notably, Apple warned to expect fewer units and longer delays for its iPhone 14 Pro and 14 Pro Max because of COVID restrictions at its main assembly plant in China.
“Last year, I’d order 10 things and get two of them. This year if I order 10 things, I get 10 things,” said Stephanie Sala, owner of Five Little Monkeys, which has eight toy boutiques in the East Bay and North Bay. In fact, “the supply is enormous and I’m seeing vendors discount products and saying they have no more warehouse space, nowhere to put new stuff.”
The looming issues for shoppers this year are the twin specters of inflation and recession — but retailers are trying to counter that with deals and discounts.
“It’s been a funky economy,” said Karla Martin, managing director at consulting firm Deloitte.
Lots of shoppers started their quests sooner this year, lured by early deals and worried that prices might rise if they waited, according to surveys by Deloitte and the National Retail Federation.
“It’s becoming a choose-your-own adventure with Small Business Saturday, Cyber Monday, Black Friday, early Amazon Days, early Black Friday before Thanksgiving,” Martin
said. “Here in San Francisco, the day after Halloween was the kickoff in a lot of stores.”
Retail giant Target began its holiday “Target Deal Days” sales even earlier — Oct. 6-8. “Following investments to optimize inventory ahead of the holidays, Target is stocked with seasonally relevant items guests will love,” it said in early October.
Lisa Anderson, president of LMA Consulting, which specializes in supply chain management, said big-box retailers clearly stocked up early to ensure that goods wouldn’t be stuck on ships from China.
Still, she said, there could be some smaller supply issues as the season wears on.
“The last-minute shopper might have to concede to buying No. 2, 3 or 4 on their list,” Anderson said. “You can always give someone a picture of what you plan to buy them, if you’re really stuck on a certain specific thing.”
Belt-tightening is clearly a theme.
Bay Area shoppers on average expect to spend 14% less this year than in 2021, according to Deloitte’s annual retail survey. It found that 40% expect a weaker economy next year, up from 22% with that prediction a year ago. Meanwhile, 36% said their household financial situation has worsened, compared with 19% who said that last year.
More than three-quarters of Bay Area shoppers (77%) expect price bumps because of inflation this year, compared with 58% with that outlook last year.
In response, shoppers are reining in their gift purchases. On average, Bay Area shoppers plan to buy eight presents this year, versus 20 last year, the survey found. They’re also planning fewer visits to both stores and websites: 6.4 trips to physical stores, versus 11.2 last year, and 11.5 visits to websites or apps versus 17.3 last year.
“People are still shopping, wanting to celebrate, still relieved we’re most of the way through COVID or at least know how to deal with it,” Dhuey said. “They’re not letting the pandemic influence them as much as they used to.”
Affordable Treasures has had to raise some prices modestly: For instance, pencils, which have sold for 20 cents apiece since 1986, are now a quarter each.
Five Little Monkeys also has had to pass along some price increases to customers, generally around 5% to 10%. Because shipping container costs are a big factor, Five Little Monkeys’ Sala said the hikes are tied to products’ size: Bigger items have bigger increases.
Consumers are increasingly conscious of wanting to support mom-and-pop shops, the Deloitte survey showed. Many small retailers closed during the pandemic and may not return.
To boost Main Street enterprises, some independent stores and other small businesses want the Small Business Administration to be updated for the current economy. The independent federal agency supports small enterprises with loans, counseling and access to government contracts, among other forms of assistance.
“During the pandemic, I got (a small business) loan and would not have survived without it,” Sala said. She was among more than 300 California business owners and 3,000 nationwide to sign a letter to lawmakers about reauthorizing the SBA for the first time in more than 20 years.
“It’s vital that Congress take a look and try to modernize it,” Sala said, noting that applying for SBA loans is cumbersome and can require separate applications at each bank. “It’s definitely time for it to get a little attention and be brought up to speed.”
At Jenny K, a gift boutique in El Cerrito, owner Jen Komaromi is hoping for a strong year. She also stocked up on inventory early back in January, which had the added benefit of locking in lower prices.
Her annual “12 Days of Christmas” sale, which runs Dec. 1-12, is one way she’s countering consumers’ recession jitters. Each day, she’ll offer one quality product at a deep discount and keep it on sale until it’s sold out.
“I think people are more money-conscious this year and have less expendable income,” she said.
Komaromi, like other retailers, worries about the impact of the recent round of tech layoffs.
Still, when it comes to holidays and gifts, many consumers don’t want to scrimp.
“Our business is historically pretty recession proof,” said Dhuey from Affordable Treasures. “We’ve been through Y2K, the early ’90s, the housing market crash, the whole COVID nightmare. Since we deal in things that make people happy and things for kids, people tend to spend on that no matter what’s going on.”