Retailers can manage Red Sea shipping delays for now
Suez Canal.
Supply chain struggles are now back on the agenda. Container ships are being forced to avoid the Red Sea and Suez Canal, the main route for shipments from Asia to Europe and an important one for deliveries to the US East Coast, after Iran-backed Houthi rebels started attacking ships as part of a campaign against Israel.
Shipping rates have surged and goods are taking longer to arrive, as containers reroute around the Cape of Good Hope.
Retailers must manage the disruption — but they should not repeat the same mistakes of 2021, when many overreacted to potential shortages, only to be left with a mountain of inventory six months later.
Although there are some exceptions, the majority of mass-market fashion is sourced from China, the Indian subcontinent and Southeast Asia and shipped abroad. (Zara-owner Inditex SA manufactures about 60% of its products close to its headquarters in Arteixo, in northern Spain, and flies in garments made elsewhere.) Vietnam is an important center for sneakers, while home furnishings, toys and electronics are also produced in Asian factories.
All these shipments — along with packaging and even wine from Australia and New Zealand — could be hurt by conflict affecting the Suez, which handles 12% of global sea trade.The extra sailing time to avoid the Red Sea is adding around 2 to 2.5 weeks to deliveries to Europe and North America. British chains Next Plc and Marks & Spencer Group Plc, as well as Swedish furniture retailer Ikea, have all warned that some spring products may be unavailable.
Higher freight rates, meanwhile, are increasing costs.
Nevertheless, the situation looks manageable — for now. Next Chief Executive Officer Simon Wolfson last week described it as “an
