Retailers are rushing to secure Christmas stock amid rising shipping costs

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

The increase in shipping costs is mainly due to attacks on Western ships in the Red Sea by Houthi rebels, who support Hamas in its conflict with Israel.

Container prices, which peaked in January before briefly falling, have risen 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 on-time deliveries for Black Friday and Christmas. However, this advance planning affects cash flow and requires additional warehouse space to store goods for 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 strong increase mainly affects bulky items with low margins, such as furniture, barbecues and kitchen appliances. Glynn noted that it is unlikely that online retailers will be able to absorb these cost increases, meaning consumers will face significant price increases on these expensive items in the coming months.

Impact of disturbances in the Red Sea

The disruptions caused by the Houthi movement in Yemen have severely limited global shipping space and container availability. The rebels have attacked more than 50 ships in the Red Sea and the Gulf of Aden, causing shipping costs to skyrocket. According to freight market tracker

Peter Sand, chief analyst at Xeneta, emphasized that importers have learned from the pandemic that securing goods as quickly as possible is crucial to protecting supply chains. As a result, some companies are shipping freight for the Christmas season as early as May, deviating from the usual late summer to fall schedule for Black Friday and Christmas inventory.

Navigate longer routes

As a result of the attacks on the Red Sea, ship owners have been forced to take longer routes through Africa and start their voyages earlier to account for the extra travel time. Dominique Nadelhofer of Kuehne + Nagel, a major maritime logistics company, explained that the Red Sea diversions are only now becoming apparent, with ships on the Asia-Europe trade taking more than 100 days to bypass Africa. This disruption has also affected the rotation of container equipment, with only around 50% of global container shipping currently completed on time.

The concerns extend beyond possible future Houthi attacks, as fears grow that reduced naval patrols aimed at countering the rebels could provide opportunities for Somali pirates to expand their activities.

Preventing a Christmas crisis

Sue Terpilowski of the Chartered Institute of Logistics and Transport agrees that companies are bringing forward their shipments to avoid a potential Christmas crisis. By ensuring goods arrive on time, retailers are trying to avoid unexpected delays at sea to avoid headlines such as “Christmas canceled, nothing in stores”.

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

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