Global retailers navigate Red Sea attacks, resort to costly alternatives

Retailers worldwide are bracing for potential delays to their spring collections as they rush to secure goods before China’s Lunar New Year holiday.

Major container ship operators, including Maersk and Hapag-Lloyd, are diverting vessels away from the Red Sea following militant attacks, prompting fears of a significant disruption to global trade.

Concerns about prolonged disruptions arise just as supply chains were beginning to recover from the impacts of the COVID-19 pandemic.

To avoid the Suez Canal, retailers are exploring alternative routes, but the longer journey around southern Africa incurs an additional $1 million in fuel costs and about 10 days of travel time.

BDI Furniture, a U.S.-based company, is front-loading orders and utilizing factories in Turkey and Vietnam to mitigate delays.

Freight brokers are now bypassing the Panama and Suez canals, opting for a Pacific Ocean route to California, where goods can be transported by rail to the U.S. east coast.

Hanna Hajjar, VP of Operations at BDI Furniture, highlights the unexpected delays, stating disruptions have extended transit times from Vietnam by 10-15 days.

The high costs of air and rail alternatives force companies to strategically prioritize which products to ship through these routes.

With attacks by Yemen’s Houthi militants impacting maritime trade through the Suez Canal, as much as 30% of shipments to the U.S. East Coast are affected.

Retailers face a race against time as factories in China close for the Lunar New Year on Feb. 10, resulting in likely delays for products intended to reach Western shelves in April or May.

Logistics experts report a container shortage at Ningbo port in China, adding complexity to an already challenging situation.

Aldi Nord and Britain’s Next anticipate delays in receiving items, prompting adjustments in advertising plans.

The situation has prompted some companies, like BDI Furniture, to consider permanent shifts in supply chains, aiming to reduce dependence on China and explore sourcing from Vietnam and Turkey.

Analysts warn that continued disruptions could impact European retailers’ gross profit margins, raising concerns about potential global inflation.

As the industry navigates these challenges, the question of near-shoring gains prominence, with companies evaluating strategies to bring factories closer to end consumers for a more resilient supply chain.