Monday Market Musings>>> The Hushed Panic Within the US Goods Market
Updated: Feb 7
Picture credit: Isaiah Villar
There seems to be a quiet panic happening in the US economy. While the grocery stores nationwide are already dealing with unpredictable product shortages and empty shelves , the neighborhood convenience stores seem to be undergoing the same predicament. Gradually panic sets in like a thin but troublesome fog, as disgruntled shoppers are unleashing their frustration on social media over the last several weeks, posting photos on twitter of bare shelves at their favourite stores.
Convenience store operators say the ongoing supply chain disruptions have also impacted their ability to adequately meet the fill-in needs of shoppers in larger cities and, more importantly, the daily essential needs of customers in secondary markets and rural areas where a convenience store might be the only store which carries food items. The shortages being reported nationwide are widespread, impacting produce and meat as well as packaged goods.
CEO of Texas-based convenience store chain TXB(Texas Born), Kevin Smartt said “As a chain, we’re probably averaging 6500 to 8000 outs a week from manufacturers. That’s a very high number” (outs refer to a specific branded product that is out of stock and cant be delivered that week). The usual contingency plan would be to restock using another brand, but according to Smartt, even that’s proving to be challenging. As buying substitute brands from alternative suppliers for out of stock products has become quite an endeavor, Kevin Smartt says “ It’s a logistical nightmare and sometimes the substitutes that we have to buy are more expensive”.
Picture Credit: Wesley Tingey
US groceries typically have 5% to 10% of their items out of stock at any given time; currently that unavailability rate is hovering around 15% according to Consumer Brands Association President and CEO Geoff Freeman. Curt Covington senior director of institutional credit at AgAmerica , has stated that; “Shortages depend on the item, store, and region of the country “, “shortages can be driven by supply chain issues, consumer behavior, or environmental factors, so its hard to pinpoint what will be effected next”.
In the span of the past few weeks, shortages at grocery stores across the country have grown more acute as omicron continues to spread, and winter storms have piled on to the strain on the supply chain. Weather-related events, from snowstorms in the northeast to wildfires in Colorado, have also impacted product availability and caused some shoppers to stock up more than usual, exacerbating supply problems caused by the pandemic.
There is also an ongoing shortage of truckers, that continues to slow down the supply chain and the ability of grocery stores to replenish their shelves at an acceptable pace. The inability to fix trucks means that truck drivers can’t haul boxes of goods which might actually contain the parts needed to fix said trucks and so the deliveries to the grocery stores get delayed. Layered atop widespread domestic transportation issues is the record high congestion at the nation’s ports, both of which contribute to the goods shortages.
Picture Credit: Rhys Moult
Another reason are the labor shortages. The Omicron variant is affecting a high number of service workers, causing employees to call in sick to quarantine, and leaving grocery and convenient stores understaffed. On top of the number of employees calling in sick, many people have simply decided to quit, fed up with the lack of pay and benefits while having to risk interacting with potentially infected customers. More than 20 million people quit their jobs in the second half of 2021, earning the name ‘The Great Resignation’.
In addition to the shortage of items , many also cost more, with the rising inflation. In 2021, the Consumer Price Index jumped 7%, the fastest pace since 1982 according to the Labor Department. Although there are multiple arguments about why the problem is as bad as it is,everyone agrees that the COVID-19 pandemic and chaotic changes in the consumption habits have caused inevitable short-term and long-term effects in the supply chain. As such, the shortage of goods is a collection of issues piling on top of each other as it seems to be getting worse , like a snake eating its own tail.
February 7th 2022 | 7:00 PM