INFLATION – We all see it oozing here, there, and everywhere.
The cost of shipping containers is at $25,000 (vs. $2,500 pre-COVID), and oil is up to $85 a barrel (vs. free if you could store it anywhere early in COVID). Eating dinner out and tipping is normal at 20% and 25% (vs. 15% to 18% pre-COVID). Further, we have become used to free money (mortgage rates 1.75~1.99%) and lots of artificial stimulus from low taxes and trillions in handouts. Keep this in mind when the Fed wakes up and turns up the heat on interest rates. It will surely cool consumer demand for all sorts of goods.
“The annual inflation rate in the US edged up to a 13-year high of 5.4% in September of 2021 from 5.3% in August and above market expectations of 5.3%. Main upward pressure came from cost of shelter (3.2% vs 2.8% in August); food (4.6% vs 3.7%), the highest since December of 2011), namely food at home (4.5% vs 3%); new vehicles (8.7% vs 7.6%); and energy (24.8% vs 25%).
“On the other hand, prices eased for used cars and trucks (24.4% vs 31.9%); transportation services (4.4% vs 4.6%); apparel (3.4% vs 4.2%); and medical care services (0.9% vs 1%).
“On a monthly basis, consumer prices advanced 0.4%, above forecasts of 0.3%, with the indexes for food and shelter contributing more than half of the monthly increase. The core index which excludes food and energy went up 0.2% MOM and 4% YOY, the same as in August and in line with forecasts.”
source: U.S. Bureau of Labor Statistics
DTC + AMAZON SALES STILL ROLLING
These channels saw stable YOY growth measured against Q3 2020 when the supplier was fortunate enough to have inventory. Companies with a (fair) omni-channel pricing strategy benefitted from all channels cooperating in sync on prices. This allowed consumers to buy what they wanted from their preferred channels (B2B too) without the friction of price shopping. Also, based on CrankTank data, October month-to-date results are heading into a solid holiday season with a strong October underway as well!
SO WHAT IS AHEAD FOR 2022
Does anyone remember 1980? When we all wake up and realize things cost ~10% more, then something must give. There will be winners as well as losers as we all prioritize what we must have from what we would like to have. CEOs in my universe are treading lightly. They’re happy to see growth, but they’re not putting the pedal to the metal, even if their sales forces swear they can grow even faster. By summer 2022, we could be in an oversupply situation in the bike and outdoor markets. Steak (or meat substitute) dinner wager on the outcome you expect? I’m taking bets!