Why the Christmas rush in October?

’Tis the season to start Christmas shopping. Yes, really. A recent report from Klarna found that 40%* of consumers are starting their shopping earlier this year. “But it’s only October!”, I hear you say, “What’s the rush?” One big reason: shortages. Not only are businesses dealing with a shortage of workers, but global supply chain disruptions continue. Most of our holiday spending relies on supply chains and product availability can suffer if they break down anywhere along the line. This includes things like cargo ship jams and a lack of lorry drivers. And the knock-on effect? A very expensive holiday season if you want to avoid disappointment.

“The best way to spread Christmas cheer is singing loud for all to hear.” — Elf

Supply chains: it’s simple Claus and effect

Global supply chains have been making headlines for months now. When the pandemic struck, factories and ports around the world shut down. That led to supply shortages. Increased time at home, followed by a much-anticipated reopening, has led to high demand. This, combined with labour shortages, has jacked up prices on pretty much everything!

FundCalibre’s Darius and Juliet talked more about supply chains and the ‘perfect storm’ in the UK, on last week’s Investing on the go podcast.

And it’s not just lorry drivers who are feeling the pressure. Deliveries and postal services are also expected to feel the heat during the festive period and will likely raise rates to accommodate the level of packages. So, if you’re mailing any Christmas parcels this year, the earlier the better.

Staying on budget without being a Grinch

Labour shortages and supply chain issues are predicted to make this holiday season more expensive than ever. But staying on budget during the holidays can be hard, even in normal times. My general rule of thumb is I aim to spend between 2-3% of our annual household income on the holidays. This includes everything from gifts and food to decorations.

According to Klarna, 80%* of consumers plan to buy online this year, which shouldn’t be too much of a surprise. One benefit of shopping online can be cost comparison and maximising offers to get the most for your money. However, Christmas shopping for some can mean extending the credit limit a little too much, only to be faced with a shocking bill in the New Year.

Fintech companies, like Klarna, allow you to spread your payments interest free across 3 months. Similarly, Barclays – a holding in Schroder Recovery** and Threadneedle UK Extended Alpha** – is getting on the ‘buy now, pay later’ bandwagon, and is extending a deal with Amazon to arrange loans to cover purchases on the platform.

Buy now, pay later deals have exploded during the pandemic, with some saying it’s the future of millennial finances. But it has also stoked fears that it’s encouraging unsustainable spending and reliance on debt. When used responsibility I think these options can be good for consumers where the alternative may be a high interest credit card. But personally, I have a long and trusted relationship with American Express – a holding in AXA Framlington American Growth** and Ninety One Global Special Situations*** – for my ‘above average’ shopping habits shall we say…

Ultimately, being proactive this year in particular, could save you money and lessen anxiety about empty shelves. And don’t forget to pick up things like wrapping paper and tape while you’re out shopping!

*Source: 2021 Holidays Unwrapped, Klarna
**Source: fund factsheet, 31 August 2021
***Source: fund factsheet, 30 September 2021