As the back-to-school and holiday shopping seasons approach, port congestion and shipping disruptions are top of mind for brands and retailers.
Imports at the country’s largest retail container ports will hit record-highs in August, according to a monthly Global Port Tracker report released by the National Retail Federation and Hackett Associates. These numbers will be driven by back-to-school and preparation for the holiday shopping season.
Freight rates have reached record highs amid pandemic-related shipping slowdowns, factory and store shutdowns, clogged ports and worker shortages. As a result, retailers have been forced to seek out alternate solutions to move product, sometimes at a much higher price point. This, in turn, has led to brands raising prices and contributing to ongoing inflation. US footwear prices jumped 4.6% year-over-year in July.
“Strong consumer demand has outpaced supply chain operations since late last year and could remain a challenge as the holidays approach,” said Jonathan Gold, NRF’s VP for supply chain and customs policy. “The continuing lack of labor, equipment and capacity has highlighted systemic issues and the need to create a truly 21st century supply chain to ensure resiliency against the next major disruption.”
In July, FN reported that cost optimization was the No. 1 issue that CEOs wanted supply chain executives to focus on today, according to a Gartner survey. Meanwhile, high tariffs on Chinese imports continue to negatively impact retail and fashion and drive prices higher for consumers.
Amid the headwinds, different retailers are taking steps to battle the ongoing problems.
In a Q2 earnings call with Investors, Deckers CFO Steven J. Fasching said the company was shipping product earlier than usual in 2021 to “mitigate exposure to supply chain challenges and get product into the marketplace.”
Deckers CEO, president, and director David Powers said that the company managed to see wholesale growth in the Ugg brand thanks to this strategy.
Deckers is also investing in air freight to transport product, which has caused an increase in costs related to expedited shipping.
“Essentially, every link in the supply chain has been impacted to varying degrees over the last 18 months,” Puckett said. To alleviate the issues, VFC, which owns The North Face, Vans, Supreme and Timberland brands, has leaned into airfreight and dual sourcing to expedite the shipping process.
“Our teams remain focused on delivering the products to satisfy increasing demand signals in the most cost-effective and efficient way,” Puckett said.
Adidas and Under Armour also cited supply chain issues in their most recent earnings reports. Adidas CEO Kasper Rorsted said his company was experiencing increased freight costs due to capacity limitations in vessels and containers and congestion in key markets.
Steve Madden Chairman and CEO Edward Rosenfeld said in an investor call on July 28 that “supply chain disruption remains a significant challenge.” He said the company shifted almost half of its women’s production from China to Mexico and Brazil for the fall to alleviate backlogs.
Large-scale factory shutdowns in Vietnam have also been problematic for brands, particularly in the athletic space, who rely on supply operations in the region. To mitigate the impact, Adidas has reallocated production and sourcing to other regions and is using airfreight for high-priced products.
According to experts, retailers should make sure to manage expectations and communicate throughly with consumers during this uncertain shipping environment.
On July 8, the Footwear Distributors and Retailers of America sent a letter to President Joe Biden asking for him to help alleviate rising shipping costs and delays. The National Retail Federation and numerous other industry have made similar calls to action.