How Big Importers Are Dealing with Supply Chain ProblemsMark
It is safe to say that no importer expected or planned for the surge of online demand this year. Analysts have noted that e-commerce now accounts for more than one-quarter of all retail sales in the UK. This number is expected to steadily increase in the years ahead and will likely reach nearly one-third of all retail sales by 2024.
Online shopping has become a daily norm for millions of UK consumers. This means UK shoppers are well familiar with receiving (and returning) merchandise bought online. With such a high level of experience with online shopping, UK consumers have great expectations when it comes to delivery speed, user experience, and smooth returns procedures. To succeed in this thriving market, e-commerce companies set up in the UK must take these expectations into account.
In the United Kingdom, revenue in the e-commerce market is projected to reach £80,678 million in 2021. Revenue is expected to show an annual growth rate (CAGR 2021-2025) of 3.5%, resulting in a projected market volume of £92,464 million by 2025. The UK e-commerce market’s largest segment is Fashion with a projected market volume of £27,060 million in 2021.
In retrospect, it’s extremely clear how no one could have expected or planned for the aforementioned surge of online demand.
Wherever we look in imports, we see a new record being broken and just when one starts to think the new record cannot be passed anytime soon, another surprise comes along.
IN ORDER TO COPE WITH THE UNEXPECTED SURGE, MANY BIG IMPORTERS ARE FINDING CREATIVE WAYS TO DEAL WITH THE PROBLEM.
A few years ago, Amazon was a pioneer in creating their own logistics department to minimize the dependency on carriers. Amazon had 20 leases of 747 jets, registered itself as a “freight forwarder” all of which were unusual in the beginning. Now, Home Depot, which is one of the largest retailers around, is taking things into its own hands by chartering its own ship in order to deal with supply chain problems. It will begin service this month. Usually, mega importers like Walmart, Target, or Home Depot in the USA rely on their huge contracts to bring their goods efficiently from overseas. However, this year with space being scarce and freight volumes more than tripling, in order to find a solution and control costs to a degree, Home Depot made a decision to go around ocean liners.
THE QUESTION THAT COMES TO MIND IS WHETHER THIS WILL BE A TEMPORARY FIX OR WILL THIS OPEN THE PANDORA’S BOX AND SEE OTHER BIG RETAILERS JUMP ON THE DO-IT-YOURSELF WAGON.
Having a regular vessel service is complicated, as the importer has to have goods ready at the same time to fill the ships so that the ships can leave at their specified times. Additionally, having empty containers ready at the same time is another challenge – especially for a company like Home Depot, who never had a ship before and will have to deal with contracts for terminals in the U.S. and the UK. It will be interesting to see how this project goes. If it becomes successful with fewer expected costs, we might see more ships added to the rotation with other big importers copying their success. This also shows how dangerous the current premium pricing structure of shipping companies is where importers are now starting to act in desperation to circumvent unending freight costs. Maybe, other than retailers doing their own shipping, we might even see some manufacturing coming back to the UK since freight levels on certain lanes are simply not sustainable. In the long term, these rates will have adverse effects on global trade.
Other than big importers, we may also see some freight forwarding companies like Uneek Forwarding also chartering some small ships to deal with the problem. In an extreme example, there was one freight forwarder that was backed by an organization of European supermarkets that started its own service. Since the demand for air freight also increased dramatically, we do see more and more freight forwarders chartering planes in order to both help fulfill customers’ orders and increase profitability. Some other strategies that importers are exploring are diversifying supply chains by switching to other countries than Asia or buying domestic, adding air freight to the logistics mix, and placing orders much earlier than needed.
In short, desperate times call for desperate measures is a term that was widely used in shipping industry this year and if the high freight and space issues persist into next year, it will be interesting to see what kind of creative new ways the importers will come up with in order to deal with the problem.
Does all of the above sound a bit worrying? Thankfully, Uneek Group has you covered. At Uneek Group we have unprecedented experience in importing and are here to help you with all your needs.
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