Retailers Rush to Secure Christmas Stock Amidst Soaring Shipping Costs

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European retailers are hastening to place their Christmas orders well in advance as soaring shipping costs and disruptions along trade routes threaten holiday deliveries.

The surge in shipping prices is primarily due to attacks on Western vessels in the Red Sea by Houthi rebels, who support Hamas in its conflict with Israel.

Container prices, which had peaked in January before a brief decline, have surged again in recent weeks. Nick Glynn, CEO of Buy It Direct, which owns several online retailers including Appliances Direct and Laptops Direct, said his company is planning ahead to ensure timely deliveries for Black Friday and Christmas. However, this advance planning impacts cash flow and requires additional warehouse space to store goods longer.

Glynn highlighted the recent dramatic increase in spot rates – the current price for immediate delivery of goods – from $4,500 to $7,500 (£3,500 to £5,900). This sharp rise particularly affects bulky items with low margins, such as furniture, barbecues, and kitchen appliances. Glynn noted that online retailers are unlikely to absorb these cost increases, meaning consumers will face significant price hikes for these big-ticket items in the coming months.

Impact of Red Sea Disruptions

The disruptions caused by the Houthi movement in Yemen have severely limited global shipping space and container availability. The rebels have attacked over 50 ships in the Red Sea and the Gulf of Aden, causing shipping costs to skyrocket. The average cost of shipping a 40ft container has increased by 140% from 2023, now exceeding $4,000, according to freight market tracker Xeneta.

Peter Sand, Xeneta’s chief analyst, emphasized that importers have learned from the pandemic that securing goods as quickly as possible is crucial for protecting supply chains. As a result, some businesses are already shipping cargo for the Christmas period as early as May, deviating from the usual late summer to autumn schedule for Black Friday and Christmas stock.

Navigating Longer Routes

Due to the Red Sea attacks, vessel owners have been forced to take longer routes around Africa, starting their journeys earlier to account for the additional travel time. Dominique Nadelhofer from Kuehne + Nagel, a major sea logistics firm, explained that the diversions from the Red Sea are only now becoming apparent, with vessels on the Asia-Europe trade taking over 100 days on a rotation by circumventing Africa. This disruption has also affected the rotation of container equipment, with only around 50% of global container shipping currently being completed on time.

Concerns extend beyond potential future Houthi attacks, as there are growing fears that the reduced naval patrols focusing on countering the rebels could provide Somali pirates with opportunities to increase their activities.

Preventing a Christmas Crisis

Sue Terpilowski from the Chartered Institute of Logistics and Transport agreed that companies are bringing forward their shipments to avoid a potential Christmas crisis. By ensuring goods arrive in good time, retailers aim to circumvent any unexpected delays while at sea, thus avoiding headlines like “Christmas is cancelled, there’s nothing in the shops.”

In conclusion, the combined effects of rising shipping costs and trade route disruptions have prompted European retailers to act swiftly to secure their Christmas stock, with significant implications for consumers and the broader retail industry.

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