Department store Smith & Caughey's on the supply chain hurdle as Christmas approaches

Smith & Caughey's says it has pivoted to source most stock from New Zealand suppliers for this Christmas trading period. Photo / Greg Bowker

Muted spending won't be the Grinch that steals Christmas but issues with supply chains could, says a Smith & Caughey's executive.

The Auckland-based department store business with outlets in Auckland CBD and Newmarket is among most retailers experiencing major delays to incoming stock from Europe, and other global markets, that should have arrived in the country months ago.

Stock delays are the result of the Covid-19 pandemic and sustained periods of no production as manufacturers and suppliers faced shutdowns in their countries. Major supply chain issues first rocked the retail sector back in April, but in recent months the issue has become worse.

Retailers are now facing months of delays as opposed to weeks, and this is for stock coming out of major markets within Asia, Europe, the Americas and Australia.

Edward Caughey, merchandise and executive director of the upmarket department store retailer, said the business had originally braced for the opposite problem - a hole in sales and with less demand that its inventory would build up - but instead it was having trouble getting its hands on stock.

"It's the opposite of what we thought would happen," Caughey told the Herald.

"Without as many planes in the air, the ability to put cargo on planes now is quite limited, so everything is ending up on ships and then there's strikes going on at various ports, and [with] Covid there's social distancing which slows things down, so the whole global supply chain has seized up a bit."

Smith & Caughey's is still waiting on a delivery of new season summer stock that was expected to arrive a couple of months ago. It was finding most delays were affecting its orders of clothing, and those coming from Europe.

"Suppliers have cut production, certain suppliers have failed or restructured their business and it has been a very disruptive time. Securing stock, and decent stock, will be the number one challenge over the next six months."

The department store retailer has pivoted to ensure it has a strong all-important Christmas trading period and is now sourcing more stock from New Zealand suppliers, particularly within the food category.

"We've always had a pretty good representation of New Zealand brands, [but] it's important that we've got some international ones, which are exclusive to us as well."

Despite supply chain issues, Caughey is confident that the summer trading period will be a good one, even without international visitors.

Strong spending momentum and sales had returned for Smith & Caughey's following the August lockdown, and its trading levels in recent months were ahead of this time last year, despite it facing 70 days closed through lockdown.

Sales within its homewares, beauty and women's fashion categories had experienced double-digit sales growth, which Caughey put down to conscious Kiwis who wanted to shop and support local, about $10 billion trapped in the economy; which would have normally be spent overseas, and good weather putting consumers in a good mood.

Caughey said people were generally spending less frequently but were now spending more in a single transaction, and that the focus had shifted from quantity to quality. "From what we're seeing so far, we're experiencing a high level of support, and I think we'll be one of the places of choice for everybody's Christmas shopping this year."

Smith & Caughey's Edward Caughey. Photo / Greg Bowker

More than 50 per cent of retailers recently surveyed by Retail NZ have reported sourcing product as the biggest issue they are facing at present.

Retail NZ chief executive Greg Harford said bringing stock into New Zealand had become harder and more expensive over the past two months.

"Most retail product would have come into New Zealand by ship pre-Covid, and air freight would have only been used for urgent and perishable goods, but what's happened is the air freight options have become extremely restricted, and at the same time sea freight seems to have reduced in capacity as well," Harford said.

Products across all categories were subject to delays, he said.

"We're hearing about issues with sporting goods, with bike parts, with books, with homewares, hardware, a bit of fashion, it's just really challenging to get any product moving around the globe at the moment."

Harford recommended that consumers start their Christmas shopping early and shop for local brands and goods.

He had heard reports of some suppliers being unable to give a timeline for delivery.

"It's not every product that is being impacted. You might have one brand of product that's hard to come by but a different brand might be available. People need to be looking at alternative sources of supply and potentially looking at a brand that might be different to what they are used to."