Widespread disruptions to global shipments may put South Africa’s peak retail season at risk, which includes Black Friday in November and seasonal sales in December, unless importers act quickly.
The sector is recovering thanks to pent-up demand, after a drop in imports of -21.8% last year caused by the temporary halt in world trade, Investec expects GDP growth of 2.9% for 2021.
There are increasing headwinds regarding vessel capacity and container availability, port congestion, increasing freight rates and production delays. Therefore, importers and retailers run the risk of receiving inventory too late for the sale season. Retailers must weigh the cost of landing stock in time to make sales against the cost of not having stock on hand.
This unusual situation results from a combination of significant events such as disruptions caused by the Covid-19 pandemic, blockade of the Suez Canal, continued port congestion and vessel omissions that have a crippling effect on chains supply. The result is a series of reliability and capacity issues causing some cargo to arrive between two and five weeks later than expected. Shipping companies, for example, have such large backlogs in some areas that they have had to stop accepting new container bookings for weeks until the backlogs are cleared.
It’s also crucial to keep in mind that Asia-U.S. Trade has a huge effect on global supply chains and, with the peak shipping season in the United States yet to reach. At its peak, market conditions are set to worsen in the coming months. This means that any stock – received on time or even ahead of schedule – will increase in potential value if competitors have failed to get the stock on time. This could lead to an increase in market share, adding a different dimension to discussions about shipping costs.
Retailers are banking on increasing Black Friday sales, and the importance of this was underscored last year when some retailers launched their Black Friday deals throughout November. In previous years, we have seen retail sales increase during Black Friday promotions. Not receiving stock on time could have costly implications for retailers.
South African retailers are competing with global demand. To demonstrate how dominant Black Friday and year-end sales have become, Chinese manufacturers are working at such a capacity to produce enough stock for the remainder of the world’s retail peak period that the electricity supply to factories is rationed in some areas, resulting in a loss of production. time from one to three days a week.
Another consequence of shipping bottlenecks is that suppliers are as affected by supply chain disruptions as retailers. They might not be able to source raw materials in time to fulfill orders. In the past, manufacturers stipulated “minimum” orders, but today they have “maximum” order quantities as they juggle their global customers to cope with supply chain constraints.
Shipping companies are in a precarious situation as they try to balance the capacity and availability of equipment across several trades to meet demand while having to deal with factors beyond their control such as port congestion, ships placed in quarantine, forced route changes and navigation delays. The sailing times were even changed along the way without notice, affecting the visibility of his expedition and lengthening the delay.
Capacity and equipment come first. Major malls in the United States, Europe and Asia benefit from the preference, putting additional pressure on South African retailers to receive their orders in time for the peak sales period. Demand is expected to increase over the next few months, which will put increased pressure on capacity, equipment and tariff levels.
Increasing demand and supply chain delays will likely cause shippers and importers to be desperate to meet deadlines and shift orders from ocean freight to air freight. This will lead to an increase in the demand for air freight and, as a result, the fares will increase, which will lead to increased disembarkation costs and potentially create another set of problems. Retailers may need to absorb the higher landed costs or pass the costs on to consumers.
Collaboration with suppliers, logistics agents and financial service providers will be essential for retailers to navigate these unpredictable times. There are a few key fundamentals that need to be covered to overcome the problems. Having a strong freight forwarding partner who has strategic relationships with shipping and airlines, as well as a large global network that can offer multiple shipping options, will be invaluable.
Another option is for retailers to ship orders earlier than normal and allow for longer delivery times. But ordering earlier has financial implications, and retailers who move earlier than usual will hold that inventory longer, putting pressure on their working capital and cash flow. This is where a financial services partner can play a major role in supporting the business.
Retailers will also need to be flexible and decisive when considering shipping options. For example, if a 12m container is not available when the original container is stuffed, you may need to accept shipping in two six-meter containers to ensure you meet your dates. entry into the store. There will be a trade-off between additional shipping costs and the risk of late receipt of inventory resulting in lost sales.
Seasonal sales are essential for the recovery of the retail industry and with proper planning Black Friday will hopefully not turn blue.