Port congestion poses major problems for shoe brands and retailers – Footwear News
US ports are overloaded with record levels of congestion and container shortages, which could cause big problems for shoe brands and retailers.
As the health crisis continues to keep many Americans indoors, spending has generally shifted from services like travel, spas, movies, restaurants, and more to tangible discretionary goods including housewares, shoes and clothing. Analysts say the surge in imports has resulted in longer delivery times and higher transportation costs for brands and retailers, who are already grappling with rapidly changing consumer preferences and other disruptions to the market. supply chain linked to coronaviruses, such as the temporary loss of workers who could be sick leave.
For the past two weeks, Nordstrom, Gap and Steve Madden along with Wolverine Worldwide, parent of Merrell and Saucony, were among the nationwide channels that warned analysts during their conference calls about the results of logistics issues related to the pandemic. of COVID-19. Primarily, the ports of Los Angeles and Long Beach in California – which account for almost half of the United States’ total imports from Asia – are currently handling record volumes as retailers scramble to replenish their stocks in due to increased consumer demand.
âNow we’re in this position where three issues need to be addressed: one, balancing the container imbalance because we have too much here and not enough in Asia to load them,â said Brian Whitlock, senior director and analyst at L Gartner Logistics and Execution Team. âSecond, the problem of congestion. While the container situation may slowly improve over time, ports could still struggle until the third thing is addressed: demand, which must either drop or normalize before ports can even start to catch up. their delay. “
Steven Madden Ltd. CEO Ed Rosenfeld last week warned of the negative effects of congestion on its supply chain in the coming months. He noted that shipping times have been extended from three to four weeks on average, and the disruption could contribute to a $ 30 million impact on its first quarter revenue.
Wolverine World Wide Inc. CEO Blake Krueger also suggested last week that the company plans to shift $ 20 million in revenue from the end of the first quarter to the start of the second quarter due to logistical delays. âWe expect that some of these port, ocean freight and inland transport congestion issues will improve steadily over the year,â he added, noting that âthis will lastâ¦ for at least the next year. at least several months “.
Additionally, Gap Inc.’s chief financial officer Katrina O’Connell said the company incurred air freight charges in the fourth quarter in an attempt to resolve issues at the ports. âNew COVID-related US port congestion and impacts on shipping lanes were unanticipated and contributed to higher year-over-year in-transit inventory levels,â she said, predicting that the problem could persist throughout the first half of the year.
While congestion is impacting the entire retail industry, some experts suggest the pain may be felt most in the apparel and footwear industries, where goods can be heavily dependent on a seasonal cycle.
âIt’s about the importance of getting products on time. Some shippers are concerned that their lines, which could be manufactured for specific retailers, will not arrive in time for the season, and they may be forced to liquidate some of that inventory, âsaid Joshua Brogan, associate partner of the practice. strategic operations. in Kearney. âThe inability to plan and ensure that inventory gets to the right place at the right time is very sensitive for clothing and footwear manufacturers. “
But not all retailers are caught between a rock and a hard place: Delivery delays caused by disruptions at the West Coast port could create an opportunity for overpriced sellers – like Ross Stores Inc., for example – to recover canceled orders by full-price stores and sell them at bargain prices.
“We are still seeing very good sourcing opportunities in the market,” Ross CEO Barbara Rentler said on a fourth quarter conference call with analysts this week. “The congestion at the west coast port has obviously slowed down some of the revenue coming into the country, so merchants are constantly moving and shaking depending on what happens.”
She added, âRegarding the end state of availability following the port disruption, I think at some point there will be a bubble. I don’t think we’ve seen this bubble yet. But at some point historically when things start to self-correct, there will be an inventory bubble … We would expect that at some point it would come back and there would be an opportunity. .
As for the duration of congestion at major US ports, experts suggest companies may start to see improvements in the second half of the year. In the meantime, as they face shipping constraints, as well as a limited availability of truck drivers to transport goods across the country, retailers are encouraged to plan ahead for the summer and summer. back to school – and maybe as far away as fall and holidays.
âRetailers need to think differently about how they manage their supply chains,â said Ken Cochran, senior director of the Alvarez & Marsal consumer and retail group. âThey have to push themselves to do what they might never have done before or that doesn’t feel natural. The freight space is incredibly dynamic right now, and the only way to get over that is to be extremely creative and break the rules. “