Ted Hurlbut

Retailers Face Higher Cargo Costs, Late Deliveries

July 28, 2010

FROM RETAILWIRE:
Retailers that benefited from trimming their inventories during the Great Recession are finding an unexpected side effect from that action has driven up the costs of getting goods shipped from overseas. How big an issue is the current shipping situation for U.S. retailers and their suppliers?      [more...]

This is no small issue for retailers and wholesalers. With the Great Recession, economies of scale in both shipping and manufacturing are unwinding.

In the short term, there's little that retailers or wholesalers can do that won't impact margins. Both manufacturing and shipping capacity has been rationalized to align supply with demand. Costs are rising, and it will take a season or two for retailers and wholesalers to develop more economical strategies to source and deliver product.

The more serious issue right now is getting timely delivery of seasonal goods. It may be that airing goods may be the only option which will only further erode margins. Retailers and wholesalers may further scale back orders to minimize air freight charges, further tighten retail supply, and protect retail prices and margins. In this environment, especially for independent retailers, until sustained revenue growth returns the name of the game remains the bottom line, not necessarily the top line.