From COVID-19 to containers, port backups delay merchandise for retailers

During the worst of the pandemic in 2020, cargo volume at the nation’s major retail container ports fell to its lowest level in four years as the economy largely shut down and retailers were more concerned about how to sell merchandise on hand rather than bringing in anything new.

But as the months passed and businesses reopened, pent-up consumer demand brought a renewed need for imports. With it came massive increases in cargo volume as retailers both restocked shelves and prepared for what turned out to be a record holiday season.

The relative trickle of 1.37 million containers seen in March exploded into 2.1 million in August, breaking NRF’s Global Port Tracker record for the number of containers imported during any single month. Volume broke the record again in September – if only by a few thousand containers – and then again in October with 2.2 million containers.

Shipping amid COVID-19

Learn more about how ports are working to keep shipping running smoothly.

Merchandise surge

The surge in merchandise-laden cargo containers has hardly slowed down since as retailers have continued to bring in goods to meet retail sales that grew 6.6 percent in 2020 – the largest annual gain in NRF records going back to 2002.

But despite the flood of containers, not all of the merchandise is reaching retailers – or their customers – in a timely manner. Longshoremen and truck drivers have been hit with COVID-19 infections, leaving a shortage of labor to unload ships or haul cargo away. There isn’t enough room at the sprawling marine terminals where containers get stacked while awaiting transportation inland. There aren’t enough “chassis” – the trailers containers get loaded on to be moved. And with the supply chain moving slowly, there aren’t enough empty containers being returned to handle the next load.

Since the beginning of this year, it has been common to see as many as 30 massive container ships at anchor in California’s San Pedro Bay, waiting to dock at the Port of Los Angeles or the Port of Long Beach, which together handle half of U.S. imports from Asia. During March, a container megaship stuck in the Suez Canal backed up billions of dollars’ worth of cargo aboard other ships for days before being freed, and there could still be ripple effects for vessels bound for the U.S. East Coast.

“The containers are part of what has become literally a perfect storm,” said Beth Aberg, president of Random Harvest Home Furnishings, which has three high-end furniture stores in and around Washington, D.C.

Aberg, who has seen “an insane increase in demand” from clients focused on remodeling and refurnishing while trapped at home by the pandemic, is waiting four months to get furniture from vendors that could previously supply it in four weeks. Sofas that used to take eight weeks can take five to seven months. Even U.S.-made products have been delayed because manufactures can’t get parts from overseas quickly enough.

“It is going to significantly affect the furnishings industry,” Aberg said. “You can’t sell from an empty wagon. You’ve got to have the goods to show in order to sell them, and people are only willing to wait so long.”

Vendors are passing along shipping costs that are as much as 10 times what they were in the past, and Aberg says consumers could see furniture prices go up as much as 20-30 percent.

Aberg isn’t alone.

An NRF survey shows 98 percent of retail respondents have been impacted by delays at the ports or other shipping delays, with problems throughout the supply chain starting in supplier countries. Retailers say congestion at the ports has added at least six days to their supply chains and more than half say it is adding at least three weeks. More than two-thirds (69 percent) say shipping costs have gone up. About a quarter (27 percent) are using other West Coast ports to avoid backed-up Los Angeles and Long Beach, and 35 percent are using East Coast ports.

“With a record 2020 holiday season and expectations for continued growth into this year, retailers are importing substantial amounts of merchandise,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “This surge in demand, combined with the lack of empty shipping containers and congestion at ports, has resulted in a significant stress on the supply chain.”

Gold said the situation reinforces the need for a strong national freight policy that addresses 21st century supply chains, including the movement of goods through ports. Stakeholders need to work together to “resolve these issues now” to avoid future port congestion issues, he said.

“The customers are coming back, but you can’t get the product to sell to them,” said Tracey Mangano, owner of CardSmart, a self-described “mom and pop” greeting card and gift shop in Buffalo, N.Y. “We had a hellish year last year and you had the product, but you didn’t have the customers. Now it’s the reverse.”

Holiday cargo

There have been no problems with greeting cards even though they are printed in Asia. But St. Patrick’s Day gifts and knickknacks Mangano ordered from a vendor in January that were supposed to arrive in three days didn’t show up until after the holiday had come and gone. Other goods ordered in November still haven’t arrived, and when some products show up, she may receive two out of 12 items ordered.

Mangano normally orders Christmas merchandise in June but put in this year’s orders in February in hope that it will arrive in time. And shipping isn’t the only cost that’s going up.

“We’re trying to get merchandise secured and get it in earlier,” she said. “But then you get it in June and you’re getting net 30 on it and you’re not putting out Christmas at that point. You’re paying on it that much earlier and it’s going to screw up your cash flow.”

Gary Weiner, president and CEO of Saxon Shoes Inc., a second-generation family owned retailer with stores in Richmond and Fredericksburg, Va., said about 60 percent of the products he sells are arriving anywhere from one to six weeks late.

“Shipping and port issues are definitely part of the equation for 2021,” Weiner said. “We have been fortunate enough to avoid the majority of it, but we will have some impact. It’s going to be much more impactful on those who didn’t plan ahead and didn’t have a little luck on their side.”

While work boots and athletic shoes are selling, there’s little market for office dress shoes, and Weiner didn’t bother ordering seasonal Easter shoes this year because of delays and low demand.

Weiner is expecting a “strong influx” of customers by late April as vaccines open up the economy and more consumers get out and about. To meet the demand, he has about 85 percent of normal inventory on hand – twice as much as some friends in the shoe business. But being ready meant ordering some of the merchandise as long ago as October, following up in November and December, and pushing suppliers in February to make sure “anything we could get shipped we started getting shipped.”

“We were a little overzealous,” he said. “But overzealous might have been good.”

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