Industry Issue: The Freight Debate

The Freight Debate

Some seven months after leaving the EU, international trade has been hit with a worldwide shipping crisis, driven by the cost of transporting containers which have rocketed from around $2,000 dollars for a 40ft container to $18,000+, with speculation that this figure may reach $22,000 at the time of PG&H going to press in mid August.

PG&H spoke to some of the key players in the sector to find out how they are managing and working around the issues, as well what this will mean to retailers in terms of inevitable price increases, which they will be forced to pass onto their customers.

Despite exorbitant shipping costs, it remains extremely difficult for importers across the board to include gift importers - to secure a shipping slot. Most carriers don't want UK cargo because of the issues when the vessels dock and are therefore favouring European ports.

Consequently, many UK suppliers have had to truck containers over, which adds an additional cost of up to £2,000 per container and can take an extra seven to ten days to reach the delivery point in the UK. Businesses are therefore having to find ways to offset and absorb the inflated costs in the short term, while restructuring their businesses to navigate the challenges in the longer term.

Top: International trade has been hit by a worldwide shipping crisis, with the cost of transporting containers rocketing. Left: The lack of sailing vessels has compounded problems for freight.

Minimising The Impact

On the positive side, Lesser & Pavey’s

managing director Julian Hunt

reports that the company is managing the issues with increased costs and delays from the Far East very well. “Careful planning, our extremely well managed supply chain, and our continued development of new products, has helped minimise the impact and we continue to trade strongly. I would hope and expect other importers to be doing the same so that our industry will continue to prosper.”

Above: Julian Hunt, managing director, Lesser & Pavey.

Freight Fright

“It’s a double whammy for importers,” points out Gisela Graham’s sales director Piers Croke. “First, a sevenfold increase in the cost of bringing the goods over here from our makers! Ouch! We made our 2021 price list in January based on freight costs of 2018- 2O20. Against this price list we took the bulk of our orders from customers up to April, for delivery in August to October. Then in May, without warning, freight costs went stratospheric. What to do? We decided (with a gulp!) to honour our January list - though we did note that one European importer unilaterally upped his prices by 9% on orders already taken.

“Second, there was suddenly a shortage of containers to bring the goods in - the reason in fact, for the freight cost hike. So, as well as having to pay more, we importers are now having to fight to find container space. An extreme example: two of the big high street chains, we’ve heard, have booked containers for 11 times the 2020 price ($25,000 a go) to be sure of being able to fill their Autumn/Christmas shelves.”

Continues Piers: “The shortage of containers meant delays would be inevitable. We ourselves have managed - touch wood! - to find ways around the shortage, sending our agents around the smaller ports to ferret out where extra containers can be found. But one way or another we reckon to be able to deliver pretty well on time although it’s going mean extra shifts in the warehouse.

“And the future? Our guess is that freight prices are going to fall back, as the empty containers gradually make their way back from Europe and USA to the manufacturers’ ports. Let’s hope sooner rather later!”

Above: Gisela Graham’s sales director Piers Croke.

Absorbing As Much Of The Cost As Possible

“These are unprecedented times for any business that imports from the Far East and elsewhere,” says Steve Davies, managing director of Joe Davies. “Covid has interrupted the usual circle of trade, resulting in a sudden intense demand for products, coupled with severe shortages of containers and ships in the Far East in particular. Demand outstrips supply and this has resulted in unimaginable price increases. Container costs have already increased by around 650% and we are not yet in the `busy` season. Rates are set to increase to over 1000%, and space on vessels will go to the highest bidder, with the situation looking likely to continue well into 2022. At the moment, it`s difficult to find anything positive to say about this and any silver lining is proving very elusive.”

Steve continues: “Fortunately, we made a very early decision to place larger than usual orders with suppliers for shipment asap. This has resulted in us having good stock levels with plenty of shipments in the pipeline before things go really crazy. Nevertheless, I’m afraid that we`ve had no choice but to increase prices. However, as always, we are absorbing as much of the cost as possible both to support our customers and to keep selling prices viable. We have also made a commitment not to increase prices on any orders already placed with us.

“Our view is that for the remainder of 2021 and into next year, placing orders with factories, and securing vessel space, will become increasingly difficult. There will be product shortages across the gift industry, and UK retail as a whole, and stock will be at a premium. “It`s difficult to contemplate, but in these uncertain times, Independent retailers should do their level best to place their orders early to secure stock for the second half of the year. The usual patterns of business just won’t apply this year.”

Left: Steve Davies and the Joe Davies team are shown outside the company’s Shudehill premises. Above: Cranes loading.

Advising Customers To Forward Order

“The lead times have been getting longer over recent years and, of course, the post-Covid shipping delays are difficult,” says Enesco’s marketing & product director Helen Cottrill.

“We have, however, been advising and encouraging our customers to forward order for many months and our order book reflects this. This gives us time to react to demand, have regular orders arriving in our warehouse and to maximise potential.

“Our products are not available from anywhere else, and we launch the product globally at the same time, so the end consumers know the product is coming and are happy to pre-order from their favourite stockist.”

Above: Helen Cottrill, marketing and product director, Enesco.

The ‘Perfect Storm’

“Homewares and housewares, like most consumer goods, are not immune from the current supply and demand issues driving increases in costs and their knock-on effect to both trade and consumer pricing,” comments

Claire Budgen, commercial and marketing

director at Lifetime Brands Europe, whose brands include Maxwell & Williams and Creative Tops. “These issues show no sign of abating, and their sustained impacts cannot be ignored or avoided, driven by extended production lead times, increased product costs and shortfalls in freight capacity, creating the ‘perfect storm’.”

Highlighting the mitigating measures that Lifetime Brands Europe is taking, Claire believes that there are three factors that are key to riding the ‘storm’: partnership, planning, and prioritisation. “We’re working closely in partnership with key supply chain partners to secure both product manufacturing and freight capacities. We’re also planning meticulously to be in stock with the right products, as well as managing both availability and cash flow in detail. As we continued to trade throughout the pandemic, we were initially caught out by the upsurge in demand for some of our product categories, but subsequently invested heavily and continue to do so. We have great availability with over 1.5m more units on just our key sellers than this time last year, but the increased cost of freight is a complete anomaly to our pricing structure.”

Explains Claire: “We’ve been working extensively with our freight forwarders who, in all fairness, have been fantastic. Both from an information flow, freight planning and availability point of view, I think we have fared exceptionally well, including securing capacity on chartered vessels. The element of pricing though is seemingly uncontrollable. Newness and innovation are vital, and they must be combined with a proposition that offers true choice, so we’re completely focused on driving this through.”

Above: Lifetime Brands’ commercial and marketing director Claire Budgen. Above: Ships and containers at the port.

Working Strategically With Our Partners

“The challenges and impact are considerable,” comments Gift Republic’s managing director Sam Wahid. “Port congestion globally has delayed goods leaving and arriving at destinations, with the congestion at ports not only causing increased waiting time for our customers - ultimately putting orders at risk of cancellation - but also creating problems for production.”

Adds Sam: “The backlog at the ports means products can't be moved from warehouses, which in turn slows down production due to shortages of storage space. To overcome the challenges, we have had to work more strategically with all our partners and give clear insight to shippers and carriers on goods ready dates more than five weeks in advance. We really hope to see 2022 return to normality."

Above: Sam Wahid, managing director, Gift Republic.

A Gift Retailer’s View

Prices Will Go Up

Greats 2021 finalist Jo Barber, owner of No. 14 Ampthill in Ampthill, has already alerted customers to inevitable price rises. “It’s not us being greedy or taking a fatter margin but a result of several different factors, from raw materials to shipping costs,” she told her customers in an online newsletter. “As much as we don’t want to, we find ourselves having to review the prices of a number of the products we sell. Although we do stock a lot of products made in the UK it’s highly likely that components will be sourced from overseas, with candles an example, where materials to manufacture the jars and the lids will almost certainly originate from outside the UK. But it won’t only be us implementing these changes - almost everything we buy will soon increase in price.” Citing a shortage of labour at the factories, and the fact that raw material prices have increased greatly due to worldwide shortages, she added: “As a result of these factors, factories have imposed price increases of between 310%, but unfortunately, the challenges don’t stop with factory price increases. We’ve held many of our prices, but we’ve reached a point where we will have to pass future increases on.”

Above: Gift retailer Jo Barber. Left: No. 14 Ampthill.