7 minute read

Industry Roundtable

THE FREIGHT DEBATE

PPS invites four senior executives from across the toy, nursery and apparel and accessories categories - André Delore, general manager, Infantino Europe; Anne Davies, owner, Room to Grow; Sam Ireland, operations director, Bigjigs Toys; and Emily Harrison, sales manager, Drew Pearson International – to discuss the current issues with the cost of freight and the effect this will have on pricing, lead times and the potential impact on Christmas.

André Delore Anne Davies Sam Ireland Emily Harrison

HOW IS THE CURRENT SHIPPING SITUATION IMPACTING ON YOUR BUSINESS?

André: “Well, it is safe to say that 2021 has been the year of logistics and supply chain, throwing multiple challenges at us including higher logistic costs and longer production. Shipping lead times are also impacting the business overall in terms of margin and our out of stock position is increasing significantly.” Anne: “We have definitely been experiencing delays on our container stock. We’re finding that a lot of goods are left sitting in ports waiting to be collected and omitted from the vessel. This is happening frequently with products we have already sold and it can be very frustrating for customers who are waiting on orders, as well as costly for us as a company trying to appease them. The inflated shipping costs are making it prohibitive to work with certain factories and we are having to look elsewhere to source our products. This raises major challenges within itself as European factories are already over capacity and many are not looking to take on new customers.” Sam: “It's been a challenge, that's for sure. We have certainly seen more items out of stock this year than ever before mainly caused by delays in shipping that we are all facing, but also due to higher levels of demand.” Emily: “The biggest impact so far is the sheer cost of it - orders negotiated with customers and costed months ago with reasonable freight rates are now suffering with the impact of costs being four or five times what they were a year ago. There is no room to go back to customers now to renegotiate on the costs. We are working with it in the hope that the situation improves as we move through Christmas on into 2022, but prices to customers and ultimately consumers will inevitably rise.”

ARE YOU PASSING ANY OF THE EXTRA COSTS YOU ARE INCURRING ON TO YOUR CUSTOMERS?

André: “We are working hard to ensure the cost is not directly passed to the customers, which in turn will help maintain the optimum retail price for end consumers. We are trying to achieve this by speeding up the development of our eco-friendly packaging using less materials and more compact packaging method resulting in significant impact on cost reduction.” Anne: “As of yet, we have not passed any of the additional costs onto consumers, but unfortunately it is inevitable that we will have to visit this idea if the shipping costs continue to remain at such a high

rate. It’s not an ideal solution, but hopefully we can still keep our prices competitive if other retailers are having to follow suit.” Sam: “We have no choice but to pass some of it on. We have recently announced a price increase across the board to help mitigate some of the massive cost increases that we are seeing from shipping. We are set to see our shipping costs finish the year over £1m higher than 2019, which is clearly unsustainable for us as a business. We have held off for as long as possible, but have been left with no other choice now.” Emily: “We have absorbed as much as we can so far, but it is inevitable that if things continue this way, we will have no choice but to reluctantly increase prices to help reduce the impact on our business. We are working with more key partners on an FOB basis because they benefit from better rates on the large volumes they ship. This will hopefully limit the cost increases to the end consumer, but there is more pressure from buyers to meet their end margins.”

HAVE THE ADDITIONAL PROTOCOLS FOR IMPORT/EXPORT SINCE BREXIT NOW SETTLED INTO A FLOW FOR YOU, OR IS THIS CURRENTLY 'SHIPPING HELL' ALL IN ALL?

André: “We are finding this is more settled now, yes, although we are still facing additional costs that we need to monitor now. Moving some big box promos on FOB (directly shipping from Far East) is a way to optimise logistics costs on retailer and Infantino side.” Anne: “Yes, it has been a confusing and challenging process that has taken time to understand, but it feels as though we have now settled into the new Brexit

Below: Infantino’s Music & Lights 3-in-1 Discovery Seat and Booster is a current strong seller for the company. Above: Room to Grow is one of the UK’s leading specialists for sustainable and inspirational children’s bedrooms.

procedures. There are changes we’ve had to make, such as how we buy from some of our European partners, which has resulted in stock holding. There have been a few European suppliers we’ve come across who no longer want to work with the UK due to the new and additional protocols, but I hope this may change in the near future when these processes are all underway.” Sam: “EU trade in and out is back to some sort of normality. Yes there are now more costs and processes involved, but we do have goods flowing both ways again. The first 12 weeks of the year could certainly have been described as hell, but now couriers, hauliers and us as a business have a good understanding of things we are in a much better place.” Emily: “Luckily we ship very little outside of the UK, but even the small amount we do despatch to mainland Europe has been a logistical minefield.”

WHAT OFFICE/DISTRIBUTION SET UP DO YOU HAVE OUTSIDE OF THE UK AND HOW DOES THIS BENEFIT THE EU CUSTOMERS?

André: “Our central office is located in Holland, and we have a central warehouse in Germany, but we also have a UK branch in London.” Sam: “We chose to keep all of our warehousing in the UK from the outset. It does make it more expensive than using an EU location, but the benefits of flexibility and stock holding levels for our customers far outweigh the cost savings that we might have seen. Our team now has a great understanding of the processes needed to ship from the UK into the EU which makes staying in the UK the best option for us.” Emily: “We work with distributors in Scandinavia, Germany and Ireland and the effects of Brexit are already impacting lead times, costs and deliveries,

but we hope that some of these issues will resolve themselves as EU/UK business becomes more confident and competent with the new protocols.”

WHAT ARE YOU ADVISING RETAILERS OF THE SITUATION AND WHAT THEY SHOULD BE DOING WHEN IT COMES TO PLACING ORDERS AND MAKING SURE THEY HAVE STOCK FOR THE KEY Q4 PERIOD?

André: “We are urging retailers to be flexible where possible – being able to extend delivery slots is ideal and updating forecasts on a monthly basis is a help, as well as planning listings and promotions six months in advance.” Sam: “At the moment nothing. We have more stock on order than ever before and shipping is working but slowly. We feel that over the next 4-6 weeks we are going to be back to a much better stock position and should hopefully maintain that through peak.” Emily: “We are keeping retailers updated and most are, on the whole, being understanding of the issues but there will be a limit to that if critical dates are missed, Christmas is a key selling period for everyone and is a finite window. Although we have managed to get stock shipped on time, the biggest issue is with the shipping lines themselves, changing docking dates, extending shipment times, but the process is out of our hands once goods have been shipped. Going forwards we may need to work with our key retail partners to shift buying timetables and book earlier for anything which has a critical launch date or a shorter selling period.”

Below: Drew Pearson International’s portfolio mixes preschool brands with older character properties, plus sports and lifestyle. Inset: Bigjigs’ Green Toys range has been enjoying solid sales.

ANY OTHER INPUT OR COMMENTS - YOU HAVE FIRST-HAND EXPERIENCE AFTER ALL…

André: “Higher logistic costs and online sales are pushing everybody to assess their business model. At Infantino we share the concern about the need to have more environmentally friendly products and packaging. This has had a direct impact in the way packaging and new products are developed. We would like to reduce carbon footprint and logistical impact, by using more compact packaging. This is a way to minimize costs not only on our side but retailer side with lower delivery costs to consumers, hence providing the end consumers with a great quality product at an affordable price.”

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