Are smaller retailers getting crushed by the supply chain mess?
Smaller retailers often count on speed, nimbleness and agility for an edge over larger competitors, but current supply chain disruptions are proving to be a high hurdle.
Ninety-one percent of SMB retailers believe larger companies have an advantage over them in the current supply chain crisis, according to a survey from Software Advice. Half of these attribute this advantage to the fact that they don’t have prioritized vendor status and 45 percent because they are limited in their ability to switch vendors. Forty-six percent have had at least one vendor drop them for reasons specifically related to being a small business.
The survey found 30 percent don’t have access to alternate or new shipping options (e.g., switching from ocean to air freight) and 41 percent are unable to pay premium shipping prices.
A Washington Post story from last November detailed how larger retailers have contracts that guarantee low freight prices while smaller importers compete for spot rates, which have been surging. The article documented how larger firms are able to offer incentives to jump ahead in securing production, raw materials and shipping containers.
Software Advice’s suggestions include forming deeper partnerships with current vendors and having at least one backup vendor. Partnering with nearby small businesses to secure product or sharing warehouse space and employees also can help.
Focusing on logistics spend was emphasized as a means to offset higher supply chain costs.
CBRE’s “Supply Chain Advisory” report that came out last December found transportation costs typically account for 50-to-70 percent of a company’s total logistics spend, while fixed facility costs (including real estate) account for only three to six percent. CBRE wrote, “It appears that increasing inventories by adding more warehouse and distribution space could significantly reduce transportation costs for many shippers.”
CBRE also advised smaller retailers to selectively raise prices, although larger firms often have better-known brands with higher customer loyalty that allow them to more easily pass through price increases as well as the scale to better absorb cost pressures without raising prices.
The NFIB (National Federation of Independent Business) “Small Business Optimism Index” in April reached the lowest level recorded in the 48-year-old survey with inflation concerns reaching their highest level since 1980.
- 91% of SMB Retailers Say Larger Companies Have an Advantage Over Them in the Supply Chain Inventory Crisis – Software Advice/Business Wire
- Small Businesses Are Being Left Behind in the Retail Supply Chain Crisis – Software Advice
- In the supply chain battle of 2021, small businesses are losing out to Walmart and Amazon – The Washington Post
- Supply Chain Disruptions Create New Opportunities for Industrial and Logistics Real Estate – CBRE
- Small Business Expectations for Better Business Conditions at Record, 48-year Low – NFIB
- Survey: 82 percent of Americans Scared That Supply Chain Issues Will Ruin Their Life Plans – Oracle
DISCUSSION QUESTIONS: Do small- to medium-sized retailers have a significant disadvantage versus larger chains in managing supply chain disruption? What advice would you have for smaller retailers for navigating supply chain instability?