Retailers scramble to beat supply chain woes
This Christmas, consumers could see rising prices on their favourite items and a loss of variety, because of the global shipping crisis that is causing long shipment delays and sending shipping costs soaring.
Richard Boyle, owner of shoe store W J Boyle & Son on Queen Street, told The Royal Gazette, he ordered his Christmas merchandise eight months ahead. Now he is not sure if the goods will arrive in time for the holiday season.
“I may have to order a stockpile of items from somewhere else, just so I have something to sell at Christmas,” Mr Boyle said. “I suppose then the Christmas shipment will arrive and then I will be stuck with that, and the stockpile.”
It is the supply chain from Asia that has been hardest hit.
Mr Boyle said the flow of shoes coming from the United States – Skechers, Crocs and Reeboks – has been steady; but his shoes coming from Vietnam – Nikes and adidas – are the problem.
“I didn’t get any Nikes for six months, this year,” Mr Boyle said.
Now, he is getting Nike and adidas brands again, but not this season’s big ticket items like Nike Air Max 97s. They are being shipped straight to the big stores in America, like Foot Locker.
“I’ve been really lucky though, because my customers have been buying the Reeboks and Skechers,” he said. “I am really grateful for that.”
Queen Street retailer, Kenny Pemberton of Gear and Gadget Bermuda, said he does not trust shipping right now, and is bringing things in mostly by air.
“Seventy to 90 per cent of the stuff I bring in is time-sensitive, so I have to expedite it faster,” said Mr Pemberton, who mainly deals in electronic items.
“That 55 to 90-day lead time, I can’t afford. The only time I don’t use air is when the item is too big. I am better off bringing in 82 cases through UPS and paying the extra fees for it so I can get it within three to seven days. Because of how we do business, and the price of the products, the shipping costs can be absorbed, which has no impact on service or products.”
The crisis began after the pandemic began more than a year ago. Shipping companies began retiring old shipping containers, ships and equipment, due to a drop in demand caused by so many people being in lock down. Many shipping containers were left scattered in ports around the world. Production in many factories and shipping companies also shut down or slowed up, due to pandemic induced staff shortages.
As a result, the cost of shipping containers exploded when consumer demand picked up again. Some businesses in Bermuda that once paid $5,000 to $6,000 to bring in a container, are now paying $25,000 per container.
“Some Bermuda businesses are absorbing that cost, but some just cannot,” said Barry Brewer chief executive officer, and president of Bermuda Container Line Ltd.
“BCL and the other shipping lines, last year, did not have our annual consumer price index adjusted rate increase, to try and help Bermuda’s economy,” Mr Brewer said. “I know there are a number of companies that are trying to do the same thing. Some of them can, but others simply can’t absorb it. They have to increase their prices.”
Mr Brewer said some shipping lines are not letting their containers come all the way to Bermuda. Instead, some are being stripped when they reach New York or New Jersey, where most of our goods are shipped from, in an effort to get the container back to Asian countries, as quickly as possible.
"The goods have to be put into a Bermuda Container Line box," Mr Brewer said. "It is a very complicated situation."
Although there have been container ship back-ups on the west coast of the United States, particularly off of Long Beach, California, Mr Brewer said the American east coast was not seeing the same issue. Bermuda ships a large portion of its goods out of New Jersey and New York.
“The problem originates with the shipper, not the port,” Mr Brewer said.
Glen Smith, general director of Auto Solutions on St John’s Road in Pembroke, said one of their shipments has gone up by 166 per cent.
“I can not be expected to eat that cost,” he said.
Mr Smith said it is not just shipping, but the entire transportation chain that has been impacted.
He is now struggling to bring in new vehicles and parts in a timely manner. Where once it took him 24-hours to fly in a new part, it now takes much longer.
“It took us 14 weeks to get a new windscreen for someone, from India to Bermuda,” Mr Smith said.
While demand for cars dropped early in the pandemic, it more than bounced back, leading many car manufacturers scrambling to catch-up. There is now a shortage of crucial components needed to manufacture cars, such as computer chips.
Mr Smith said one of the things complicating the crisis in Bermuda, is the rule that companies can only bring in 20ft containers.
“The rest of the world is dealing in 40ft containers,” he said. “So we spend a lot of time sourcing 20ft containers to bring from China to Bermuda, just to carry tires. I understand the rules and regulations, because a 40ft container on the road would be double the size, but during times like these some concessions should be considered.”
Some American shipping experts have estimated the crisis will be resolved in four to six months, but Mr Brewer thought it would take much longer than that.
“I am hearing up to a year,” he said.
Mr Brewer said to fix the problem more ships have to be manufactured, more containers made available, and more labour needs to be hired.
“You need more warehouse space, and more truckers,” he said. “You have to get rid of Covid-19. This is a very complex issue with a lot of contributing factors.”