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There’s going to be a major toy shortage this holiday season

The holiday season might include shortages of holiday gifts and rising prices as supply lines are impacted by the lingering pandemic.

People taking pictures of themselves in front of the Rockefeller Center tree in New York on Christmas Day 2020.
People taking pictures of themselves in front of the Rockefeller Center tree in New York on Christmas Day 2020.Read moreSeth Wenig / AP

Store shelves during the holiday shopping season could prove to be merry but ever so tight.

An inventory squeeze could frustrate shoppers, as 82% of retail executives surveyed are somewhat or very concerned about inventory shortages, according to a new survey by KPMG.

And 55% of those surveyed indicated they plan to set up alternate suppliers.

"I can't remember a time when the concern about inventory was that significant," said Scott Rankin, national advisory leader for the consumer and retail team for the KPMG US Advisory practice in Boston.

Last year, Rankin said, many retailers feared being stuck with too many clothes and other gift items as consumers planned smaller family gatherings and limited their trips to the malls in light of the coronavirus pandemic.

Even so, consumers shifted into high gear in December and the National Retail Federation ended up reporting in January that retail sales during 2020's November-December holiday season grew an unexpectedly high 8.3% over the same period in 2019 to $789.4 billion, exceeding the National Retail Federation's holiday forecast despite the economic challenges of the pandemic.

This year, retailers are voicing early concerns about how they’re going to stock shelves as they combat truck driver shortages, supply-chain disruptions, congestion at the ports, and the shortage of shipping containers.

Some toy makers are sounding the alarm and warning consumers about the possibility of empty spots on shelves during parts of the season. MGA Entertainment CEO Isaac Larian, whose company owns LOL Surprise! and Rainbow High dolls, told CNN Business: "There is going to be a major shortage of toy products this year."

Enter the contingency plans and out-of-the-box strategies.

If things get really tight, retailers know that in some cases you'll just throw $25 or $50 at something that can hold a bow.

The KPMG survey noted that 59% of retail executives plan to invest more heavily in what they call "safety stock" — or extra items to have on hand in case demand increases unexpectedly.

You know, kind of like buying extra candles, cute coffee mugs or boxes of chocolates for your own gift closet in case someone gives you a gift unexpectedly.

Some retailers are making a pitch directly with their loyal customers to explain some of the challenges ahead.

Food purveyor Koeze, based in Grand Rapids, Mich., actually included a letter signed by its president, Jeff Koeze, discussing delivery and shipping concerns along with its holiday catalog that arrived in the mail in September.

Koeze, a fourth-generation, family-run company, is well known for its Colossal Cashews, Cream-Nut brand peanuts and peanut butter, chocolate turtles and gift baskets.

The company told customers it is "experiencing shipping delays on many of the items we need."

In addition, the company said there have been delays in deliveries to customers.

As a result, the letter asked that customers place their orders as soon as they can.

Last year was strong, said Donald Cumming, vice president of marketing for the company, because many people weren’t traveling during the pandemic.

"Rather than spending money seeing people, people spent money on gifts," he said.

More concerning this year, he said, is the threat of delivery delays for customers.

Fulfillment partners are near capacity now, he said, and there's growing concern about labor shortages for delivery companies during the holiday season.

Many consumers, he said, have grown dependent on two-day shipping but this year ordering too close to the holiday could prove to be problematic.

By having customers order well in advance, the company can better work with them to make sure that gifts arrive on time.

"We're very holiday driven right now," Cumming said. About 80% to 90% of the company's sales are in the last three months of the year.

Some retailers are trying to get shoppers to treat September as the new December and stock up on gifts now.

For those thinking about the calendar, this year there will be one month between Thanksgiving and Christmas Day. Thanksgiving is Nov. 25. Hanukkah will begin the evening of Nov. 28 and end the evening of Dec. 6 this year.

More cynical consumers, of course, might wonder whether shortage scares can be self-serving prophecies to drive up prices and cover rising shipping and transportation costs. Can any shortage be real, after all, if you’re willing to simply wait or buy something else?

Try telling that to someone on a hunt to desperately find the perfect gift on a list, though.

Just try wrapping up a book when someone wants, say, a new Barbie Dreamhouse priced at $200 or a Lego Star Wars: The Child for $80, also known as Baby Yoda.

Consummate consumers can already spot some signs of trouble ahead. Aisles in some clothing stores don't feel quite as jammed. Back-to-school sections at some retailers started taking on an empty feel a week or two before the first day of class.

Sometimes, you must head to more than one store, even in the same chain, to find a better selection. Or you're forced to go online to that big box retailer's website to find more sizes and options.

The big push toward buying online — including ordering online and picking up inside the store or at curbside — will continue.

E-commerce sales are expected to grow 35% this holiday season, surpassing robust sales in 2020, according to the KPMG survey.

"Consumers continue to move more of their purchases online," Rankin said.

And the pandemic remains a concern, even though a vaccine is available now and wasn't last year for most people.

How long the delta variant surge will drag on remains unknown. What’s ahead relating to the virus clearly will have an impact on consumer behavior.

"COVID has changed how people shop," Rankin said.

He gave one example of how people changed how they shop at malls and stores. Instead of going to five stores and spending $50 at each store, for example, many consumers will now spend the same $250 overall but at just two or three stores.

It's more important, Rankin said, for retailers to reach out to their loyal customers early in the season to capture that sale.

Many retailers plan on launching special loyalty program promotions along with Black Friday and Cyber Monday sales to drive business.

Retail executives, according to the KPMG survey, anticipate that 2021 holiday sales will represent an average of 35% of their company's total annual sales.

KPMG expects that 2021 holiday sales for U.S. retailers will be 7% higher than last year — a growth rate that is almost double the retail industry's historical annual growth rate.

Retail executives believe prices may increase as much as 15% year over year. At the same time, 68% believe this holiday season will be "much more" or "somewhat more" promotional than last year.

While no holiday shopping season would survive without big discounts, Rankin predicts that some deals may not be as good as they were historically early in the season.

Shoppers who want to stick to a budget may need to work overtime to keep an eye on sale prices and inventory. Or, if things get bad, don't scoff at loading up on gift cards.