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‘Zero chances of it arriving on time’: Retailers issue Christmas warning as ‘perfect storm’ ignites

Major Australian retailers have issued fresh warnings to customers to get their Christmas shopping orders in now as serious congestion in global supply chains causes massive delays on shipping new consumer goods into the country.

Home and leisure goods, along with consumer electronics, are likely to be the most affected by the supply chain crunch, which has been ongoing throughout the pandemic but has become increasingly dire in recent months due to port closures, freighter scarcity, Delta outbreaks and soaring demand.

Super Retail Group chief executive Anthony Heraghty, whose company runs stores like Supercheap Auto, Rebel and BCF, told The Age and The Sydney Morning Herald the shipping situation was rapidly getting worse, with big retailers such as his forced to order stock eight to twelve months in advance.

“But even if you are buying it eight to twelve months out, the chances of it arriving on time is zero,” he said. “If it’s not in the shed or on the shelf today, for Christmas this year I think the chances of it being [in stock] come that peak time is incredibly remote.”

Mr Heraghty said shoppers should certainly consider “getting in early” and doing their Christmas shopping now, with current delays expected to stretch well into next year and potentially even through to 2023.

This is thanks to a ‘perfect storm’ of COVID-related events putting a strain on nearly every point in global supply chains. To start, consumer demand has been at record highs due to border closures and lockdowns redirecting dollars that would have been spent elsewhere, such as travel.

That demand has meant 90 per cent of the global fleet of freighters are currently in use, a rate compounded by a lack of passenger flights coming in and out of countries, which are responsible for carrying a significant amount of airfreight.

Reliance on these shipping channels has meant virus outbreaks at key ports can have serious impacts. China’s third-biggest port, Ningbo-Zhoushan, has been shut for the last ten days due to a worker contracting the virus, and the country’s other ports are all also running well under capacity.

Travis Erridge, chief executive at supply chain consultancy TMX Global, said these issues are even further compounded for Australian retailers, who are being forced to pay a premium to even get ships to dock at local ports.

“Shipping lines are making decisions based on volume not based on who needs it, so unfortunately we’re having to pay a premium to attract the boats,” he said.

To secure 20 feet of shipping container space now costs $4000, up 400 per cent from this time last year. These costs are continually increasing between 4 and 14 per cent per week, Mr Erridge says.

Every major retailer that reported its full-year results last week called out shipping costs as a point of concern, with discount seller The Reject Shop saying logistics had cost the business an additional $9 million over fiscal 2021, a figure the company expected to increase in fiscal 2022.

This is likely to prompt an increase in prices for consumer goods as businesses increase costs to preserve margins. Appliance manufacturer Breville said it would do exactly that, with chief financial officer Martin Nicholas telling investors shipping prices currently “hold no bounds”.

Paul Zahra, chief executive of the Australian Retailer’s Association, said he was “deeply concerned” about COVID’s continued impact on supply chains. Home and leisure goods are most likely to be affected, he believes, along with electronics as markets are also currently experiencing a shortage of semiconductors.

The lockdowns currently enforced in New South Wales and Victoria will help lessen some of the inventory crunch, Mr Heraghty said, as consumer spending has dropped due to the stay at home measures. However, overall the industry’s outlook was not positive.

“It’s highly unusual to have a volatile demand curve and a volatile supply curve. We really are in uncharted territory here, and with no real resolution on the horizon for either.”

But not all retailers will have stock issues, he said, with many - including Super Retail which spent $200 million shoring up its inventory position - having prepared for this situation.

“Retailers that are well planned with their inventory and have positioned themselves to ensure that they’ve got their hands on stock, I think will be in a good position,” he said.

Credit: The Age By Dominic Powell

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