Supply chain issues already threaten prices of holiday gifts, Christmas trees

ByParija Kavilanz, CNN Business, CNNWire
Wednesday, September 22, 2021
Supply chain issues already threaten prices of holiday gifts
Supply chain issues are threatening the delivery of popular holiday gifts -- even Christmas trees.

LOS ANGELES -- It's a good thing that consumers are in a mood to spend heading into the holiday season. They may have to dish out more for a new artificial Christmas tree this year, depending on where they buy it from.

Some large sellers of artificial trees say they are increasing their prices by double-digit percentages and are blaming unduly high shipping costs tied to the ongoing global supply chain mess.

"We'll have to raise prices. For trees, it'll be on average about 20% higher," said Mac Harman, CEO of Balsam Hill. The company, based in Redwood City, California, does more than $200 million in direct-to-consumer annual sales of artificial Christmas trees and other decorations in the United States.

"Even then it won't cover our own costs because we're paying as much as 300% more per shipping container this year," said Harman.

Months and months of shipping disruptions resulting in part from pandemic-triggered overseas factory shutdowns, port congestion and shipping container and labor shortages have caused delays for products ranging from laptops to sofa sets.

Now, with the year-end festive season around the corner, suppliers of seasonal decor are also anxious about having enough products on hand to meet demand.

National Tree Company in Cranford, New Jersey, is a large wholesaler of artificial trees and other holiday decor such as ornaments, wreaths and inflatables Santas to retailers like Walmart, Target and Amazon.

Chris Butler, the company's CEO, expects shoppers will be keen to indulge in decorations to celebrate, especially after another challenging year in a pandemic.

"From a macro perspective, we expect demand for our products will be up 25% over last year," said Butler. "We expect to sell roughly 1.5 million to 2 million artificial trees this year."

But he worries that if demand is too robust, he might not be adequately stocked to meet it because of shipping delays. The bulk of the company's products are made in China.

"We think we are 10% below where we typically are every year with our inventory of trees, wreaths and garlands," he said. Butler said National Tree Company is raising its wholesale tree prices by 20% to 25% because of exorbitant freight costs. Retailers, in turn, might pass along some of this price increase to consumers, he added.

"We didn't have any products to sell"

The industry group American Christmas Tree Association estimates the overall size of the US market for artificial Christmas trees to be somewhere between $1 billion to $2 billion annually.

At Balsam Hill, delays in receiving inventory have already created unprecedented setbacks.

In mid-August, the company sent out its fall products catalog. Besides Christmas products, the business also sells fall decor items like wreaths for the front door or porch, which it imports from China along with most of its other fall products and the Christmas trees.

"For the first time ever for us, the catalog was out, and we didn't have any products to sell," said Harman. "Our shipments didn't arrive on time. We're still trying to figure out exactly where the products are. Are they still on the water or stuck in ports? If this keeps happening, we could go out of business."

Some inventory has arrived. "It's about 12 out of 50 products listed in the catalog," he said. "Our overall daily sales are significantly down because we don't have items to sell."

He hopes to be in a better position with Christmas trees "because we do bring them in throughout the year," he said. But even so, Harman said Balsam Hill's tree inventory is running about 22% below last year's level and overall inventory of holiday seasonal decor is down 42% year-over-year.

"What we're most concerned about are decorations like ornaments, tree skirts and wreaths," he said. "We source these products worldwide. Even if one or two containers with those items get delayed, we may not have a whole category of items." Harman said holiday ornament supplies are 50% below last year's levels.

Treetime, a direct-to-consumer seller of artificial Christmas trees and decorations based in Lake Barrington, Illinois, said it has incurred a more than a 500% jump in shipping costs this year.

The company designs and manufactures its own brand of pre-lit and unlit trees that cost $100 to over $1,000 depending on the height and design. Its trees are also made in China.

"We're absolutely trying to absorb some of the tremendous freight cost increases ourselves," said Laurie Kane, co-owner of Treetime. Some of it, she said, will hit consumers' wallets.

"We're increasing our prices, but we're trying to hold it to under 20%," she said.

Kane is keeping a close eye on holiday shipments, which should have arrived by now but haven't.

For Kane, it's critical that the inventory comes in by Thanksgiving.

"The misconception is that people start decorating in December, but it's really by November end," she said. "December is when you buy the presents. Will anyone want our products if they come in later than that? That's the biggest challenge for us."

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