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Grocers grapple with supply chain, labor woes as shelves empty out ahead of holidays

·6 min read

Can’t find what you need at the store again? You’re not alone.

Shoppers pushing their carts around the supermarket may notice thin shelves while reaching for their favorite products, as the bottlenecked global supply chains increasingly hits home for consumers already stung by higher prices on virtually everything.

Bare store shelves were common at the start of the pandemic, driven largely by panic-buying. But almost two years in, some spaces are empty again — but for slightly different reasons. As the holiday season inches closer, economists are predicting that it's going to be harder to find some favorite items.

“There's no sign of a let up in this very strong additional preference for goods,” Phil Levy, chief economist at Flexport, told Yahoo Finance this week.

“As long as people have that preference, and they have the money in their pockets, we're going to see a lot of pressure on the supply chain,” he added.

Global shutdowns and a worldwide shortage of workers has disrupted the flow of goods, and many industries are still catching up a year and a half later. Yet according to Flexport’s post-covid indicator, the consumer’s preference for goods will not be “slacking” as we head into the 2021 holiday season.

However, industries across the board are facing unique challenges. Cars and electronics, for example, were hit hard by the shortage of semiconductor chips. Toys coming from Asia are experiencing lengthy shipping delays due to containers slowly en route to the U.S.

These kinks have escalated to such a degree that last week, President Joe Biden announced that the Port of Los Angeles hours would be expanded to 24/7 in an attempt to smooth out the flow of goods across the country. Still, many retailers and grocers are feeling the pinch, and are worried about the holiday push.

The ripple of effects have become more obvious to the general manager of Dill Pickle Food Co-Op store in Chicago, Illinois.

“We've definitely been seeing lots of outages and basic items, like pantry items, such as beans, rice, grains,” I’talia McCarthy said on Yahoo Finance Live on Thursday. “We've also seen outages even in our meat department, as far as poultry and beef.”

Another sign of the times: “a huge decline” in shipment orders not fulfilled.

“Many of our distribution centers are seeing outages due to people calling out sick and not being able to hire enough truck drivers [or] people to work the warehouses to actually get the food to the stores that they're supplying to,” she added.

McCarthy also noted that she’s in daily communication with the store’s biggest distributors, UNFI, and is now participating in “order smoothing.”

“We'll place our order and they'll only fulfill [about] 29% [that was the lowest]. The highest has been 89%,” McCarthy said.

The distributor informed McCarthy “whether deliveries will be canceled so the communication has been really good. But there hasn't really been any bright light to look forward to so far.”

‘Quite low’

Shelves previously filled with pasta and canned food are seen empty at a Trader Joe's grocery store as shoppers gather supplies with coronavirus fears spreading in Encinitas, California, U.S., March 12, 2020.      REUTERS/Mike Blake
Shelves previously filled with pasta and canned food are seen empty at a Trader Joe's grocery store as shoppers gather supplies with coronavirus fears spreading in Encinitas, California, U.S., March 12, 2020. REUTERS/Mike Blake

Unlike the early stages of the pandemic where some items were universally scarce— including cleaning supplies, toilet paper and meat — on-shelf availability has stabilized since it’s dramatic drop in November last year, according to data from NielsenIQ.

Yet one key metric has retreated somewhat. The total on-shelf availability rate was 94.6% in September, which was a decrease from 95.2% in August.

While that may seem like a marginal change, the figure is actually “quite low,” J.B. Delabre, VP of retail analytics at NielsenIQ, told Yahoo Finance in an interview.

“It means also that basically suppliers and retailers have not been able to recoup that replenishment on being able to be on the shelf as much as it used to be pre-COVID,” Delabre said.

“If you were to correlate the waves of COVID cases with the on-shelf availability, you'd see the high correlation,” he added.

Reassuringly, Delabre also suggested that “we are never going to hit the same numbers that we hit in wave one of 2020, where we saw some drops that went down to at least high seventies.”

We've been struggling a lot with hiring. Hiring has not been as easy as it once used to be.I’talia McCarthy, Dill Pickle Food Co-Op, Chicago

While the rush to buy products like toilet paper and disinfecting supplies may be reminiscent of the panic buying phase seen early in the pandemic, Dill Pickle’s McCarthy said it hasn’t been an issue at their store just yet.

“I definitely see a little bit of panic buying,” McCarthy said. “I do see a couple of buyers stocking up on pantry items as well as household items, such as toilet paper Kleenex.”

Several other stores have started to limit the number of items shoppers can buy, as fears of hoarding and shortages return, according to McCarthy. However, at Dill Pickle, they aren’t setting those limits.

“I haven't seen anybody hoard too much food quite yet, but if it does come to that point, we will definitely set limits,” McCarthy told Yahoo Finance. “We'll put signs near that specific item and say, please only take two and also our cashiers are kind of our people holding our customers accountable.”

Apart from supply chain bottlenecks, the culprit still remains to be the labor shortage that's frustrating retailers across the country.

“We've been struggling a lot with hiring. Hiring has not been as easy as it once used to be,” McCarthy said. “Not very many applicants and when people do apply and we set up interviews, a lot of them aren't showing up to the interviews or telling us that they already found another job.”

The current worker shortage has also added another concern to some stores, there’s not “enough bodies” to run the store.

“We have a lot of employees getting sick and calling out sick, which puts us in an even harder position as an organization,” McCarthy explained.

Like McCarthy’s store, grocers nationwide have had to increase their prices. According to new figures released by the Labor Department, wholesale inflation jumped 8.3 percent from August of this year compared to August of 2020.

“We've received a lot of notices from specific farms and companies within the Logan square area, sending us notices, letting us know that they're raising their prices back by 30%,” said McCarthy. “When they raise their prices, our costs go up. We in turn, raise our prices for our customers.”

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv

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