As retailers and suppliers head down the home stretch for holiday sales, the full brunt of product delays is being felt across many categories. Shipping issues pop up every year, but as has become apparent throughout 2021, the situation this year has been particularly intense, with huge pressure in multiple categories on both delivery dates and costs.

According to executives with whom we spoke, orders are being cancelled if products can’t reach retailers until late this month or early December – too late for large retailers to count on distributing them to stores in time for holiday business.

Warehousing for spring
That’s forcing many of them either to warehouse the merchandise until spring or shift the order to another retailer since demand in many categories outstrips supply. In the case of seasonal goods such as holiday gift products, one licensing agent reported that among his licensees, 20-25% of orders have been cancelled because shipments won’t reach the retailer in time.

The crux of the well-documented logistics issues this year from factory floor to retail store, which actually began in late 2020, has been a near doubling of delivery times to upwards of 90 days. Even for companies with assembly plants in the U.S., there have been delays in receiving parts and material needed to build products. For example, Stanley Black & Decker, which owns the Craftsman brand and has plants across several U.S. states, has seen “transit times” for parts and materials from the Far East balloon to 85 days from a more typical 45 days, CEO Jim Loree said last week.

Lost business
“We are seeing cancellations,” says Matthew Hoffman, CEO of Uncanny Brands, which sells licensed kitchen appliances and plush, the latter under the Bleacher Creatures brand. He adds that in some cases “we are calling customers and telling them we are not going to deliver at the expected date, [so it would] be too late for them to bring it into their warehouse or store.” Uncanny posted strong sales this year, but Hoffman estimates it lost another 10% (“seven figures”) of business due to the delays.

“Many of the retailers are still keeping their orders [despite late shipments] because they need goods [heading into 2022] and are taking whatever they can get,” says Hoffman.

Hasbro last week said $100 million in orders expected in the third quarter were delayed a month or more, but that a “majority of them” were delivered to retailers at the start of the fourth quarter this month, CFO Deborah Thomas said.

At Jakks Pacific, where third quarter sales declined 2.2% ($237 million), inventory increased to $89.8 million from $54.6 million a year earlier, about $40 million of which had left Asia, but took “a very long time” to arrive at U.S. and Western European warehouses, CEO Stephen Berman said.

“Products that are being produced will now more likely be spring for us,” Berman said. “The products that we have shipped FOB (free on board) to retailers are primarily for the holiday season. Anyone that doesn’t have the majority of their goods shipped by now from Asia likely won’t get on the shelf” in time for the holiday, he said. About 50% of Jakks’ product are shipped FOB, Berman said.

Despite the delays, licensors and agents report few licensees requesting extensions of contracts or payments to offset the business lost to logistics issues. That’s in contrast to 2020, when many contracts were amended to reflect pandemic-induced business changes. Licensors are less inclined to do so this year, says Hoffman, since the issue this year is one of fulfilling supply, rather than of slumping consumer demand, as was the case in 2020.

One agent makes a similar point. “When COVID hit we received a lot of requests from licensees, but I am not being asked because of the logistical issues to make extensions,” says James Slifer, SVP Business Development at The Joester Loria Group, which represents companies such as Kellogg’s, Jack Links and AB InBev (Corona and Modelo). “The issues arise when the guarantees come due, but what licensees need to do is be proactive about it and not [first] react when these payments are due.”