Supply chain woes hound tech firms as holiday season approaches

The ongoing supply chain issues have hit many companies, including technology firms. Some companies have decided to hit the brakes on advertising given low product stocks. These ad reductions come amid the holiday season, a period traditionally considered profitable for companies.

In his Oct. 21 column “Fully Charged” for Bloomberg, tech reporter Mark Bergen wrote: “Tech earning season is a reminder that online ads are big business – and could be impacted by omnipresent supply chain problems. That business, while still on the rise, is suffering a serious headache.”

Bryan Wiener, the CEO of e-commerce analytics company Profitero, described the ad suspensions as “a monster issue.” Based on his company’s numbers obtained from more than 600 websites in October, there were “unusually high” out-of-stock figures for certain product categories. Thirty-four percent of electronics were out of stock, while 33 percent of grocery products had low supply.

Bergen wrote that consumer goods and electronics have been paralyzed by microchip shortages and supply chain issues ahead of the holidays. These two industries spent huge amounts on marketing and advertising, but companies without item stocks are usually not inclined to advertise them.

WLxJS CEO John Donahue shared one instance of a company halting its advertising campaign due to supply shortages. Donahue’s media consultancy firm recently lost a client, a car manufacturer forced to stop buying search ads with its brand name. “Everyone is going to feel it. Money is moving,” he said.

According to Bergen, most marketers prefer planning their ad budgets months in advance. But with unstable component and product shipping dates, marketers have shifted tactics. They now run advertisements on different platforms depending on how many products are on hand and how many will arrive. (Related: Online shopping hit by inflation during pandemic.)

“The game is a lot more like shifting cards around,” said Jamie Schwab, head of E-Commerce, Sales and Marketing at Dole Packaged Foods.

Tech companies attest to the impact of shortages

Bergen took a closer look at the impact of the shortages through the lens of online advertisements. Tech company executives themselves have confirmed the effects of the supply chain issues. If the shortages continue, these firms will be looking at a rather muted holiday compared to past years.

Snap Inc. highlighted the supply chain issues during an earnings call. The company behind Snapchat has seen its shares drop by 20 percent in the current quarter. Snap CEO Evan Spiegel said that “the ongoing magnitude and duration of these global supply and labor disruptions are inherently unpredictable.”

He added: “This impact was compounded by the ongoing macroeconomic effects of the global pandemic with our advertising partners facing a variety of supply chain interruptions and labor shortages. This, in turn, reduces their short-term appetite to generate additional customer demand through advertising at a time when their businesses are already supply constrained.”

Snap Chief Business Officer Jeremi Gorman also chimed in on advertisers paring back on product promotions. “Advertisers don’t necessarily want to accelerate the sales of products that they are going to have a hard time getting into the hands of customers,” he said.

Sheryl Sandberg, Facebook’s chief operating officer, also acknowledged the impact of the shortages on advertisers. She pointed out during an earnings call that the impact has been felt in “every region and across a range of verticals.”

“E-commerce is no longer growing at the pace it was at the height of the pandemic. These factors have been compounded for many advertisers by major global supply chain issues and labor shortages, which have left many consumer businesses with less inventory. This has reduced their appetite to generate demand from consumers, which has impacted advertising spend,” Sandberg said. (Related: Facebook and Twitter stocks plunge as advertisers leave.)

Despite the claims by Snap and Facebook that supply chain crunches are affecting e-commerce, Weiner noted that the field “is growing so dramatically.” While he foresees the shortages continuing to hit marketing well into 2022, he believes that the supply chain woes will barely dent the revenues of technology companies.

TechGiants.news has more articles about tech companies scaling back marketing efforts amid supply chain issues and product shortages.

Sources include:

Bloomberg.com

SeekingAlpha.com

S21.Q4CDN.com ^[PDF]