European retailers are placing their Christmas orders early to avoid holiday delivery disruptions caused by soaring shipping costs and trade route disruptions,
experts say.
In recent months, Houthi rebels supporting Hamas in its conflict with Israel have attacked vessels in the Red Sea, driving up shipping prices. Container prices, which peaked in January and briefly declined, have rebounded sharply.
Retailers like Nick Glynn, CEO of the Buy It Direct group (which owns online stores such as Appliances Direct and Laptops Direct), are planning and booking shipments well in advance. Glynn noted that while early planning should prevent disruptions to Black Friday and Christmas stock, it impacts cash flow and warehouse space since goods must be stored for longer.
Glynn explained that the spot rate for immediate delivery has risen from $4,500 to $7,500 (£3,500 to £5,900) in recent weeks. This increase significantly affects bulky, low-margin items such as furniture, barbecues, and kitchen appliances. He stated that most online retailers cannot absorb these price hikes, meaning consumers will likely see significant price increases for big-ticket items in the coming months.
Lessons from the Pandemic
The disruptions caused by Yemen's Houthi movement have limited global shipping space and container availability. The rebels have attacked over 50 ships in the Red Sea and the Gulf of Aden, disrupting global shipping routes and causing shipping costs to soar. The average cost of shipping a 40ft container now exceeds $4,000, a 140% increase from 2023, according to freight market tracker Xeneta.
Peter Sand, Xeneta's chief analyst, said that importers have learned from the pandemic that shipping goods as quickly as possible is the best way to protect supply chains. Some businesses are already shipping Christmas cargo as early as May.
Typically, retailers start importing goods for Black Friday and Christmas between late summer and autumn. However, Sue Terpilowski from the Chartered Institute of Logistics and Transport noted that companies are now bringing shipments forward to avoid potential disruptions.
Diversions and Extended Routes
The attacks on ships have forced vessels traveling between Asia and Europe to take longer routes around Africa, starting their journeys earlier to account for the extra time. Dominique Nadelhofer from Kuehne + Nagel, a major sea logistics firm, said that the diversions from the Red Sea that started last December are now evident, with Asia-Europe trade rotations exceeding 100 days. Only around 50% of global container shipping is currently completed on time.
Additionally, there are concerns that as naval forces focus on countering Houthi rebels, reduced maritime patrols may allow Somali pirates to increase their activities. Photo by Pierrette13, Wikimedia commons.