West Coast Port Problems Present Back-to-School Questions

Date: Friday, June 16, 2023
Source: Sourcing Journal

As labor strife disrupts the West Coast ports, retailers are trying to understand what this means for their back-to-school season.

More than half, or 54 percent, of children’s apparel, footwear and backpack imports flowed through ports dotting the West Coast in the 12 months prior to May 31, 2023, according to Panjiva. This means these products could run into availability problems in the summer months when people are shopping for the new school year.

The disruptions should have less of an impact on backpacks, which historically see a peak in May, the supply chain intelligence firm says. But imports of children’s clothing have a later peak in June and July.

As apparel retailers prepare for the upcoming back-to-school season knowing the fluidity of the current West Coast port situation, retailers should take every measure possible to ensure they can get products to consumers quicker in the event of further disruptions, according to Chris Rogers, head of supply chain research at S&P Global Market Intelligence.

“Retailers should be looking at their most critical lines and finding alternative delivery routes,” Rogers told Sourcing Journal. “That may include routes by sea using the Suez Canal, or even air freight if the products are profitable enough.”

Beyond apparel, the effect on seasonal retail industries may be minor if the disputes can be settled this month, Panjiva said.

Over the six-year stretch from 2017 to 2022, June accounted for 8.2 percent of annual U.S. seaborne imports—in line with an average of 8.3 percent, representing represent one-twelfth of a year’s imports if spread equally across months. Meanwhile, July and August accounted for 8.8 percent and 9 percent of ocean-borne imports as the peak shipping season ramps up.

But the higher inherent seasonality for apparel increased the number of products imported in the late summer months, as retailers prepare for parents rushing to buy kids clothing and shoes for back-to-school season.

This makes the stakes somewhat higher in July and August, as 9.5 percent of apparel gets imported in July before jumping to 12 percent in August.

Rerouting to other ports is an option under consideration given the unsettled port labor talks out West. Sixty-four percent of import shipments arriving in the U.S. entered the country via East Coast ports to start April, compared to just 36 percent going through the West Coast, according to data from supply chain visibility platform provider FourKites.

This number is a dramatic change from September 2021, when East Coast ports took in 54 percent of the cargo while West Coast gateways oversaw the remaining 46 percent.

But as back-to-school approaches, retailers that haven’t already considered rerouting may be out of luck, especially as the Panama Canal restricts shipping amid historically low water levels due to a severe drought.

“It probably is already too late for early- to mid-July deliveries given regular services take as much as six weeks for non-direct services to arrive,” said Rogers. “Rearrangements for August are still possible. Routes via the Suez Canal may be a viable alternative.”

However the port situation plays out, apparel retailers already committed to bringing fewer products than they usually do via West coast ports.  Overall, back-to-school products shipments there were down last month by 13 percent compared with the year prior, with footwear (25 percent), apparel (12 percent) and backpacks (5 percent) all down.

“The drop in shipments in May likely reflects a mixture of lower anticipated consumer demand and the ongoing process of destocking (reducing inventories) that retailers are going for,” said Rogers. “That said, if inventories are too low then retailers won’t have the flexibility of putting alternative lines on shelves if new products don’t arrive.”

Rogers pointed out that U.S. retail sales by clothing stores fell by 0.3 percent in April versus March on a sequential basis, marking a seventh-straight drop according to U.S. Census Bureau data.

The decline in apparel demand going into the back-to-school season follows wider trends.

U.S. seaborne imports of containerized freight across all ports fell by 16 percent year-over-year in May, Panjiva data shows, following a 15 percent decline in April. The fastest rate of decline came in consumer discretionary goods, which fell by 26 percent, and materials (which include chemicals, metals and packaging), which dropped by 18 percent.


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