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Global product shortages hit local retailers where it hurts
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Editor’s Note: This story is part of a series on supply shortages locally. Look out for an upcoming story on shortages in agriculture/food supply.

From clothes and couches to cars and air conditioners, things just seem to be missing from the shelves more often these days than they used to be.

For Lisa Schlueter of Waseca, who has struggled to find themed lights and other decorations ahead of the holiday season, the timing is exasperating.

“The shelves were mostly empty for Halloween decorations and now Christmas decorations,” Schlueter said. “At least not near as much supply as in previous years.”

For Shyanne Hensley of Owatonna, the problem is somewhat more pressing.

“It’s getting hard to find the brand and sizes of diapers we need,” Hensley said.

These anecdotes and impressions among local residents are borne out in the experiences of local business owners, whose own problems securing inventory make them keenly aware of the frustration their customers are feeling. Ryan Glassmaker, owner of E-Z Own Plus, a furniture store with locations in Owatonna and Albert Lea, has seen it too many times recently.

“Everybody gets a sober look on their face anytime you tell them the order time,” Glassmaker said.

That order time is four to six months for furniture from E-Z Own Plus, compared to four to six weeks before COVID-19 disrupted global supply chains. This has made him lose customers.

The fact that his prices are also creeping up on nearly every product category he keeps in stock probably isn’t helping, either.

The one problem Glassmaker has been spared that other business owners have not been is the cost of shipping, which has increased astronomically in recent months. That’s because he picks up most of what he sells himself from a warehouse in Wisconsin.

For Camille McCarthy, general store manager at Finally A Gift Store, a gift store and clothing boutique in Faribault, the pressure of the impending holiday season is increasingly felt.

“We’re having to order much sooner than we normally do so we get it in, and if you don’t order soon enough, you’re not getting all of your products in,” McCarthy said. “We’re still ordering stuff for the holidays and some companies are quicker than others.”

With other shop owners like herself also ordering well in advance of the holidays, anxious to be left empty-shelved during retailers’ most profitable season, the shipping cost has also gone up, in addition to McCarthy’s products shipping and arriving later. The prices of some of her products have also increased recently, as the companies from which she buys her products raise their own prices.

Fortunately, in only the last year or two, McCarthy made a shift in the way she does business that has saved her from much of the pain other retailers are currently experiencing: she decided to start filling her shelves with more local products.

“Just kind of a lucky coincidence,” she said. “We fell in love with these companies. It’s a better feeling, I guess.”

Rather than being beholden to global supply chains beginning in countries across the world, where manufacturing may have been halted due to the way that country’s government is handling COVID-19 or experiencing their own supply chain problems, McCarthy can simply look for companies near her. While they may not be quite as cheap and efficient, they can deliver goods far quicker and with much less uncertainty.

Goods she’s ordered from China or other countries that have to be placed in shipping containers and shipped overseas, however, such as her home decor gift items, are a different story. Orders placed in February, for instance, have only recently arrived.

“It’s been a bit of a challenge, I would say,” she said.

What’s taking so long?

The novel coronavirus emerged in an unfortunate location for the global supply chain.

That location is Wuhan, a key manufacturing hub in China — the manufacturing capital of the world. For a vast array of products, it’s also where the global supply chain begins. When the Chinese government shut down factories to stop the spread of COVID-19, other manufacturers requiring their goods — semiconductors, auto parts and more — to produce their own goods could no longer do that. This meant fewer goods being produced overall.

At the time, economists predicted that while the supply of goods would decrease, the temporary closure of stores and malls around the world would similarly lower demand. The problem, in other words, would cancel out.

This turned out to be wrong. While supply became depressed and stayed that way, demand didn’t stay low for long. Spending more time at home, demand for electronics, furniture and more ticked up. While unemployment also temporarily reached very high levels, former President Donald Trump’s $2 trillion coronavirus relief bill in March 2020 — followed by President Joe Biden’s $1.9 trillion relief bill a year later — helped keep that demand strong.

But with all those factories shut down for so long, and demand having piled up in the meantime, acute bottlenecks started causing massive delays as manufacturing groaned back to life. Warehouses began to fill with products as companies found themselves unable to take in all the product they’d ordered, a problem exacerbated by the recent shortage of truck drivers who would bring normally transport inventory from warehouses to local stores. This caused massive traffic jams at sea as shipping ports were unable to transport their inventory to warehouses, and thus could not take in more containers.

With this new urgency and demand for shipping, prices have also skyrocketed. And with big businesses like Walmart, Target and Amazon able to pay those high prices to stock their shelves, the small, independent businesses have suffered the worst of those delays and shortages. The pandemic also accelerated consumers’ transition to e-commerce, further hurting small retailers and sending their customers to Amazon and a few other online giants.

Companies ordering in excessive quantities before the holidays have only made the situation worse.

For Beret Froehle, manager of the Rare Pair, a shoe store in Northfield that sells other goods like clothing, handbags and winter accessories, it has been more difficult getting some products than others recently. Getting shoes, for instance, has been far more difficult than clothes.

“A lot is dependent on where are the factories and where are specific companies,” Froehle said.

Many of the shoe companies the Rare Pair orders from ship their products out of southeast Asian countries such as Vietnam, many of which have had to intermittently close their factories in response to surges of COVID-19 and a lack of available vaccines in those regions. For the Rare Pair, that means waiting a year to receive an order of sandals, rather than the usual six months. Sometimes it means orders are cancelled altogether.

While few of her customers are surprised by the situation, Froehle added, she suspects some customers are ordering online what the Rare Pair hasn’t been able to acquire. Still, she said, she continually feels “really lucky that people continue to shop local.”

With delays and cancelled orders already upon her, though, Froehle’s advice was clear: “Shopping early for the holidays is really the way to go this year.”

Trickling down

One might think Jacob Dougherty, owner of Waseca County Auto Sales, would be somewhat more immune to supply chain issues. He sells used vehicles, after all, which were built before the supply chain disruption.

The problem, Dougherty said, is that “it all trickles down.”

“The [shortage of] new cars put[s] a strain on the used cars and drive[s] the prices way up,” he said.

While Dougherty said supply chain issues have not been as much of a problem as securing enough employees, the supply chain issues have gotten worse in recent months. Part of that is getting car parts — what used to arrive in a day now takes three to five days. This delay is due not only to complications with manufacturing overseas but to a lack of truck drivers and other employees needed to bring the parts from the manufacturer to all its different stops before arriving at Waseca County Auto Sales.

It’s affected his and other car dealership businesses in stranger ways, too: buying back cars from customers sold a few years ago for a higher price than they sold them for, because demand is so high that they can then be resold for even higher, for instance.

“That’s just what the market dictates,” Dougherty said.

And while the market mostly seems to be hurting consumers in the moment, Doughery emphasized the financial instability it heralds for businesses.

“What if the market did shift and I’ve got 100 trucks on my lot that I paid $50,000 for that are now worth $40,000?” he said. “I’m out of business.”

What Dougherty tells his customers that balk at the sky-high prices of vehicles is if they don’t have to buy today, it might be worth waiting until the market simmers down. But he doesn’t think that moment is coming anytime soon.

“And maybe I’m wrong,” he said. “I have no idea.”


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Existing OHS Citizens Task Force held first meeting last week
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Emily Kahnke / By EMILY KAHNKE emily.kahnke@apgsomn.com 

A task force of 25 community members was brought together to decide the fate of the existing Owatonna High School. (Emily Kahnke/southerminn.com)

A motion was brought forward and passed at the Owatonna School Board meeting in September to assemble the Existing Owatonna High School Citizens’ Task Force.

With nearly 60 applications submitted, 25 community members with different skills, backgrounds and perspectives were chosen to participate in the task force. One of the members is a student at the high school who wanted to get involved because of her interest in a career in architecture. The group also consists of city leaders, business owners, community activists and parents of past, present and future Owatonna students.

The chosen applicants are Ali Farkhudin, April St. Martin, Ashley Moriarity, Breanna Weisbrod, Bret Hansen, Bruce Paulson, Daniel Gorman, David Swenson, Emily Sherwood, Gail Thompson, Jane Draheim, Jodie Smith, Joel Hunt, Josephine Nguyen, Josh Cosens, Julie (Biekeberg) Fiske, Kristen Peterson, Laura Jensen, Marc Wiese, Matt Durand, Matt Kottke, Pat Heydon, Quinn Meyer, Troy Klecker and Zach Spinler.

The group had their first of several meetings last week to get to know each other and discuss the various ideas that were submitted for the existing building via the Engage Owatonna website. Engage Owatonna is a new website designed to be a central hub that connects community members with each other and with community decision-makers seeking input and listening. One of the first projects of the site included collecting ideas of what should become of the current school one the new high school currently being constructed opens.

During the first official meeting, no decisions were made according to district superintendent Jeff Elstad, who is not a decision maker for the group, but attends the meetings and offers himself as a resource for the task force members.

Elstad

“The members of the group discussed with more clarity and purpose what the task force as a whole wanted to walk away with at the end,” Elstad said. “Feedback was shared from the Engage Owatonna website over the summer which was categorized and discussed at the meeting.”

Many ideas had been shared on what to utilize the existing high school for. A brewery, a child care facility and pickle ball courts were among the ideas shared through Engage Owatonna. The district also offered the suggestion of utilizing some space for district office use. One consideration would be converting the northwest corner, or C Plaza, to be remodeled for use as administration offices. According to Elstad, the current district maintenance shops are in a state of “disrepair.” The Ag/Annex building at the current high school facility could be used for this purpose.

Also under consideration is keeping the tennis courts to be used by students, district members and the community and utilizing the gymnasium and locker rooms for the high school gymnastics team and youth gymnastics programs.

Representatives with Wold Architects are heading up the meetings to guide members to stay on task and on budget. With only $11 million to work with from the 2019 bond referendum, planning needs to be quite detailed.

The goal is for the task force to finalize its planning and bring a proposal to the board for approval by January or February. Design development will begin shortly thereafter, and it is anticipated that pre-construction will start as early as January 2023, with major constructions starting in June or August 2024.

According to information shared on the Engage Owatonna website, the district has no plans to add square footage to the existing building. However, part of the existing budget does account for potential demolition. Areas that could be demolished include the math, science and tech area, lunch room, atrium, underground plaza areas, and the 1912 part of the building that includes the auditorium.

Emily Kahnke / By EMILY KAHNKE emily.kahnke@apgsomn.com 

Out of nearly 60 applicants, 25 were chosen to participate in the task force. One of which is a current student who has an interest in architecture as a career. (Emily Kahnke/southerminn.com)

While the meetings are not open to the public, updates will be posted on the district website which can be found by clicking on the New High School tab and then the drop down menu for the Existing High School.


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New Bosch warehouse switches owners in $26M sale

A newly constructed warehouse in Owatonna’s industrial park has changed ownership, but the use and occupancy of the building will remain the same.

On Nov. 2, Don Roger Norman — a billionaire real estate developer based in Nevada — bought the Bosch Automotive Service Solutions warehouse on 370 Festal Place NW for $26.2 million. His company, Norman Oklahoma LLC, bought the 266,000-square-foot warehouse from SFG Owatonna, LLC, a California-based company that built the facility for $15 million in 2020.

According to Greg Kruschke, the community development manager for the city of Owatonna, this type of sale is not uncommon among the commercial building community — though this particular price tag is unique.

“When this building was built, it was what they call a ‘build-to-suit.’ Bosch was always going to be the tenant, but never wanted to own the building,” Kruschke said. “When [SGF] developed the building, their plan was to sell it in a year or two.”

The Minnesota developer Opus Group worked in conjunction with SFG to build the warehouse last year. The official completion of the building was March 2021.

Kruschke explained deals such as these, especially with buildings that were built-to-suit, happen frequently. He also said many of the commercial buildings in Owatonna are owned by other formations and real estate companies separate from the companies that occupy them, including some of the major manufacturers in Owatonna’s industrial park.

“Basically what will happen is [a business] will have a proposal for a certain company who wants so many square feet and specifics for a building, and they will float this around to different developers,” Kruschke said. “When they find the best lease rate, usually a five-to-10-year lease, they’ll put the whole package together and pick which one they want to be in.”

In addition to finding the best developer to build the warehouse, which ultimately was a $15 million capital investment, Kruschke said Bosch pays the property taxes, utilities and all other bills connected to the building.

At the Bosch warehouse, where the company uses the building as a distribution hub for its automotive repair and maintenance equipment, Kruschke said an important piece to note is that Bosch was looking at multiple states to build in.

“It’s a big deal that Bosch decided to locate here, instead of Illinois; it was about an 18-month process,” Kruschke said. “[The city] put in a lot of work on this one.”

With the sale of the warehouse, Kruschke said nothing will change for the city, and Bosch will still remain the tenant, going about its normal operations in the facility.

“The only thing that really is going to change is who Bosch writes out their rent check to,” Kruschke said. “This is essentially a landlord/tenant relationship.”

The warehouse sits on 18 acres and features 26 dock doors, 12 semi-trailer parking stalls and 7,600-square-feet of office space.


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