VENDORS FEAR HIGH COSTS, TIGHT OCEAN SHIPPING SPACE COULD DAMPEN CONSUMER ENTHUSIASM FOR FURNITURE

HIGH POINT — While buyers and vendors are upbeat about gathering at this week’s High Point Market that looks a lot more normal than last October’s staggered event, the cost of and lack of space on containers serving major trade routes remain a source of concern and in some cases anger.

With ocean carriers racking up huge profits, vendors say their ability to serve huge demand is held hostage by practices they believe amount to extortion, especially on trans-Pacific routes. Some fear carriers’ actions — or inaction when it comes to helping alleviate short supply and moderating costs of service — will eventually smother consumer demand for their goods. The bad news is none see an end in sight as the holiday selling season approaches followed by a glut in demand for container space before Chinese New Year.

Importers of all sizes are affected. Ashley Furniture Inds., for example, is the fifth-largest importer of containers to the U.S. market for any sector, trailing only Walmart, Target, Home Depot and Lowe’s, according to the Journal of Commerce. Even that buying power of shipping some 290,000 containers a year hasn’t left Ashley unexposed to current ocean-freight price volatility.

“We have the contracts, but that doesn’t mean they’ll get it to you,” said Ashley President of U.S. and Canadian Sales Rick Coppola. “And now they just want to drop (containers) at the port, so it’s hard to get them inland since they don’t want to do the complete fulfillment.”

Nice Link Home Furnishings President Jay Carlson said the five-digit cost for getting priority on container ships from Asia is not sustainable for retailers.

“A $3,999 (retail) sectional is potentially $4,599 to $5,000 depending on the margin the retailer wants to put on it,” he said. “At some point, the retail price point will exceed what the consumer thinks they should pay.”

Nice Link has so many containers in its China warehouse that it can’t add a lot of new production, which is forcing hard decisions for production.

“We have so many containers in the warehouse we can’t put anything else in. For customers who do a better job with container flow, we can emphasize their product so we can ship them in three to four months ex-factory,” Carlson said. “I’m having to pick and choose what’s on the line based on (retailers’) ability to flow containers.”

In a letter to customers, Manwah CEO Guy Ray said the company expects costs to continue to rise in the coming weeks and months, as “all the carriers are currently overbooked, and they are not fulfilling contracts, allocating capacity to sky-high spot rates.” He added Manwah has absorbed significant additional fees despite constant negotiations with carriers to secure contracted space.

That led Manwah to institute a $4,500 surcharge on landed-cost orders effective June 2 in a “small-time allotment, which is what we can get our shippers to commit to.”

The idea is to expedite shipments and create clarity to help retailers plan their own pricing better than with weekly spot rates as high as $15,000. “This will be in effect until further notice, keep(ing) in mind rates change every other week with the market remaining fluid.”

While costs are rising to bring containers across the Atlantic, the rates on those routes are nowhere near those for U.S.-bound cans from Asia. Michal Blonski is managing partner of Tatfa, a specialist in managing European sourcing for North American customers.

“With peak season out of Europe coming in July and August, containers that had cost $3,500 will run $6,000 to $8,000,” Blonski said, adding that planning ocean freight is easier for manufacturers there. For example, “Polish trade is balanced 50/50 imports to exports, so they can have cans coming in.”

He added that, while bookings that traditionally occurred two weeks before shipment now need to be planned up to eight weeks out, the timeframe can accommodate normal production schedules.

“Six to eight weeks aligns with typical production leads, so when you get an order you make the booking immediately,” Blonski said.

It’s no consolation, but Manwah USA President Gabriele Natale noted that everyone’s in the same boat when it comes to historically high container costs and scarcity.

“The water rises for everyone, and it would be different if only a few companies were affected,” he told Furniture Today at market. “What used to be $999 pre-pandemic is now $1,299 to $1,399, but a company’s competitive value in the market is the same since it’s hitting the whole industry.”

This post is quoted from: https://www.furnituretoday.com/industry-issue/vendors-fear-high-costs-tight-ocean-shipping-space-could-dampen-consumer-enthusiasm-for-furniture/