E-Sourcing Forum » Retailers Are in a Price War to Get Their Goods Delivered

Retailers Are in a Price War to Get Their Goods Delivered

July 29th, 2010 at 04:58pm DWilmes

A recent article from the New York Times on the state of shipping around the globe caught my eye. It seems as though retailers are feeling the pressure.

Retailers are now seeing an even larger effect from the recession: they are in bidding war to ensure that their goods are delivered to store locations.

“The grills shaped like kegs and toolboxes, ordered for a Father’s Day promotion at Cost Plus World Market, arrived too late for the holiday. At the Container Store, platinum-color hangers, advertised in a summer sale catalog, were delivered days after the sale began. At True Value Hardware, the latecomers were fans and portable chairs.”

Although retailers are slowly increasing their demand for freight to ship their goods, the freight industry has been slow to increase its capacity. This has caused a bottleneck of goods that can’t find their way to their intended locations on schedule.

“The problems stem from 2009, when stores slashed inventory. With little demand for shipping, ocean carriers took ships out of service: more than 11 percent of the global shipping fleet was idle in spring 2009,” according to AXS-Alphaliner, an industry consultant.

With fewer cargo ships and containers for space, retailers are looking to the sky to move their finished products. This is the main reason behind FedEx’s recently revised 1st quarter earnings estimate. The company is benefiting from desperate retailers trying to move goods on time in any way they can.

In order to understand the scale of this bidding war and its effect on retailers, we can simply look at the spot rate for a 40-foot container from Hong Kong to Los Angeles. Prior to the recession, around July 2009, the spot rate was approximately $871. Today, that same shipment costs a retailer around $2,614.

Supply and demand economics are vast at work in the global shipping market. One of the retailer executives from the article suggests an alternative his company is using to hedge costs. “To play it safe, Jeff Siegel, the chief executive of Lifetime Brands, has started scheduling items to arrive as long as three months before they need to be in stores. That means a higher cost for holding inventory than usual, but interest rates are relatively low, and he would rather have the goods in hand.” Otherwise, you may be one of the unfortunate retailers who don’t have products on hand for a big promotional event.

Email Forward & Bookmarks

Close this Window Bookmark and Share This Page

Save to Browser Favorites / Bookmarks

Email This to a Friend

Copy HTML:

If you like this then please subscribe to the RSS Feed.

Entry Filed under: General

Some HTML allowed:
<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Trackback this post | Subscribe to the comments via RSS Feed