Lower import costs help some retailers over those that stockpiled

BIO: In his role, Strang utilizes Flexport’s global logistics performance data to define short- and long-term ocean operations strategies that optimize carrier, intermodal and port performance. Prior to Flexport, he served in the U.S. Navy as an operation and tactics expert and strategic planner.

KEY QUOTES FROM STRANG: 

“The positive side is, if you are a small business and you’re competing with some of these larger importers, they brought their stock in at a much higher cost level. They’ve imported it at a much higher freight rate, it’s been sitting in a warehouse or in a container, it’s continuing to accrue cost. And you’re seeing that with the inflationary pressures. So even though spending has gone down and importing has come down, prices have remained elevated, because all of these goods are incurring costs. If you’re a business that is still in the market, you still have goods coming in, you’re now importing at a lower cost, you’re paying less for the freight, you’re paying less for storage. So we’re seeing a lot of pressure to get those goods into the market, get them on the shelf, because now they can compete better, you can either charge less and capture the market share. Or you can bring your price up to match what you’re seeing on the shelf and create more revenue opportunity.”

“Importers that do need to bring in inventory are stuck behind those other importers that don’t. And that’s forcing them into modes that they don’t necessarily want [as carriers reduce capacity]. So they might not be able to take quite as much advantage of those lower spot rates. Because they have to use a premium service, they have to use an expedited service, they have to use transload instead of rail, maybe air instead of ocean if they’re really critical to get to market. So they’re also not able to take that advantage and lower their landed costs of those goods as much as they should be able to.”

“Early in the season this year, we saw a move away from contract rates onto the spot market. The contract rates that were signed, were signed at basically 2021ish, little bit less than that spot rate prices. We’re a 10th of that now. So the shipper has just moved over onto the spot because they are not generally enforceable contracts. You do see enforceable contracts in the market. They became more popular as the rates are rising, where you see these two-year, three-year contracts in the market. It doesn’t present a large portion of the business. Some of those contracts also come with more guarantees for more spot space. So if you agree to stay on this contract, then you have more access to spot. So there are advantages of shipping at those higher rates, if you balance it across your book of business.”