Supply Chain Problems Have Small Retailers Gambling on Hoarding

Megan Searfoss has been hoarding sneakers in Connecticut.

Ms. Searfoss, the owner of two running stores in Darien and Ridgefield, Conn., would normally have about 3,000 pairs of shoes in stock ahead of the holiday season. But as she watched supply chain concerns in Vietnam mount this summer and into the fall, she secured a new storage facility and is now carrying around 4,100 pairs.

It’s a costly gamble for Ms. Searfoss, who said she is extended about $165,000 more than she would typically be in November because of worries about potential shortages.

“It’s placing a big bet and anticipating that what all the analysts are saying is correct,” Ms. Searfoss said. “Usually, we get through the New York City Marathon and then we stop buying shoes — we sell off what we have and go into January super, super lean. But we’re being told not to do that because there’s just not going to be any shoes.”

The buildup of running shoes in Connecticut is just one example of how supply chain woes and pandemic-related shortages are affecting thousands of small businesses around the United States this holiday season. While the widespread availability of vaccines is translating into a busier shopping season than last year, businesses of all sizes are grappling with the impact from factory shutdowns overseas, backups at ports, and trucking and other labor shortages.

For many small businesses, the unpredictability this year has forced them to make buying decisions months or weeks earlier than they normally would and to tie up more of their cash in inventory, which can be risky.

“The big thing is you really have to order in advance,” said Dan Quinn, an owner of What We Make, a furniture business in Algonquin, Ill., which sells tables and other wares through Etsy. “I’ve got 14 weeks of projects. I need to get most of that material in house as fast as possible and keep buying it until you have a stockpile basically.”

While many small businesses are affected by manufacturing issues overseas, some have used this moment to their advantage. Etsy, which powers online stores for millions of sellers, said that more than half of its U.S. vendors source materials from within their own states, allowing them to bypass many of the supply chain problems that are impacting the global economy.

Etsy stores “don’t have the complex supply chains that are vulnerable to single points of failure,” Josh Silverman, Etsy’s chief executive, said in an interview.

Still, the range of shortages can manifest themselves in unusual ways.

Isabel Amigon, owner of the online store Sololi, is still waiting on an order of Christmas tree ornaments she placed in April. The manufacturer alerted her that the order would be delayed because of a shortage in strings to tie on top of the decorated orbs.

Ms. Amigon, who is based in Westchester County, N.Y., said that she was worried that if she didn’t get them in time for the holiday season, she would have to wait until next year to make use of the inventory. The string shortage has also led her to remove specific home goods items from her website, such as table runners and washcloths.

“Even if I get them by the end of November, I won’t be able to sell all of them because most people have already bought their ornaments,” Ms. Amigon said. “I placed the orders early and I still have to face this situation.”

Other missing items are more traditional than string.

Earlier this year, Angela and Sean Arnold were planning to order another set of Disney princess dolls to fill some shelves in their toy store, Playmatters Toys, in Pepper Pike, Ohio. But they got a notification in September from the distributor alerting them and other toy store owners that the items were “indefinitely out of stock” because the factory in Vietnam where the dolls are manufactured was shut down because of a Covid-19 outbreak.

Even though they anticipated shipping delays and ordered some toys in mid-May instead of August, they could not get ahead of the global disruption.

And it’s not only dolls. The couple has been missing out on other toys and electronics because of shipping delays or disruptions in manufacturing plants in Vietnam. The couple has also been forced to raise prices on some products as they face higher transportation and wholesale costs from toy vendors.

“Some things we ordered in June and July are still coming in,” Mr. Arnold said.

Because of these kind of delays, Etsy has viewed this moment as one in which small businesses can provide gift options that are not reliant on overseas factories and shipping. Extra consumer interest in small businesses, whether online or offline, would likely be welcome after the pandemic dealt a crippling blow to so many last year.

Etsy said it had seen searches for living room furniture soar by 1,572 percent and less dramatic but significant jumps for dining tables, checkers or chess boards, suggesting that some shoppers are coming to the site rather than going to chain stores.

Etsy learned how to better handle large surges in demand after face masks exploded as a category on the site during the onset of the pandemic and it has made improvements designed to mitigate shipping issues it experienced then. Mr. Silverman said that now, virtually all items from sellers in the U.S. have an expected delivery date, which was not the case a year ago, and shoppers can filter products by geography to shop from vendors in their area, which can help accelerate shipping.

The company also said it checks in with sellers to ensure they have enough raw materials and supplies when its technology observes jumps in demand for specific items.

Mr. Quinn, the owner of the furniture seller What We Make, has seen his business boom as Americans grapple with long wait times and lack of availability for furniture from chains. Customers have been willing to wait 10 weeks for a dining table from him, particularly after seeing 20-week waits at chains like West Elm.

“The big box stores don’t have a lot of things they normally have so the positive for us is that people are sort of forced to look at other options whereas before they’d settle for the simplest option,” he said.

Still, he has seen his business disrupted in other ways, including a sharp increase in material prices and a scramble for reclaimed wood, which typically comes from old barns.

“The people who take down the barns for the material we use, a lot of them ended up getting laid off or going on unemployment,” Mr. Quinn said. “So we have had to try to stockpile material and order well in advance of what we used to do.”

While Mr. Quinn has been thriving in spite of competition from major furniture sellers, the country’s biggest retailers are often better equipped to handle supply chain issues than small businesses. Companies like Walmart and Amazon are massive enough that they can charter airplanes to obtain certain goods.

Jeannine Cook doesn’t have that luxury. Ms. Cook, the owner of Harriett’s Bookshop in Philadelphia, noticed during the summer that publishers were having trouble delivering her book orders, with some unable to even provide a timeline for when orders would arrive. The problem became more widespread in late August.

Ms. Cook, who opened a second location in Collingswood, N.J., in July, said that more customers were canceling their orders from the bookshop.

“It makes me nervous because I don’t want folks to feel like they can’t get what they need or want,” Ms. Cook said. “It’s hard because we’re already up against the big-box companies that have so much more infrastructure than we do.”

A recent study by Adobe showed that out-of-stock messages in October more than quadrupled compared with October 2019. That’s one reason that the retail industry, including small businesses, have urged the public to shop early this year to secure gifts for the holiday season.

“I hate that we have now gone right from Halloween to Christmas,” said Ms. Searfoss, the proprietor of the running stores, who said that she began holiday marketing on Nov. 1 for the first time. “I don’t want people to feel frantic but I do think it’s pretty serious that they’re not going to get what they want this year.”

She anticipated that shipping delays and out-of-stock issues at bigger chains might drive business to her stores. “People, those days before Christmas, will be buying whatever they can from whatever local store they can,” she said.

“It’s just a little bit stressful for me, thinking, ‘OK, look at all that I’ve bought,’” Ms. Searfoss said. “If I buy it, will they come?”