Footwear Insight

in San Pedro Bay near the Port of Long Beach is "starting to ease" and that Port officials are continuing to encourage companies to utilize all gate times, including on weekends, to efficiently move their merchandise in and out. Higher freight costs are leaving those looking to move finished goods across the world, largely two options: pay up and pass on costs to customers via higher prices or forget about reach- ing the market with the merchandise altogether. Given their larger pool of resources and personnel, larger firms are at advantage in securing alternative supply chain solutions. Almost no vendor wants to publicly air their grievances for fear of retalia- tion or an adverse reaction by existing shipping and sourcing partners. But in its five-page letter to the President, the AAFA was able to cite some examples without naming the reporting firms (see sidebar at right). Nike CFO Matt Friend, during the company's Q4 conference call in late June, told investors, "We expect supply chain delays and higher logistics costs to persist throughout much of fiscal '22 (ending May 31, 2022)," adding Nike's, "in-transit, full-price inventory remains elevated as we continue to experience longer end-to-end lead times for supply." Adidas Group CEO Kasper Rorsted, at the company's Q1 conference call in May, told analysts that footwear industry supply chain issues might not fuel increases in product pricing in the months ahead but rather less discounting, depending on the product category. Rorsted was clearly onto something. More and more footwear is likely to be sold at the asking price, not pro- motionally discounted in the months ahead, contributing to stronger margins overall. That trend would be a win-win for footwear vendors and retailers alike. With current inflation a contributing factor, price per pair of footwear was up 4 percent in April, according to the FDRA. Under Armour's David Bergman re- cently told company analysts that the company anticipates "increased freight expense from a supply chain relative to the prior year as we work through ongoing logistics and transportation challenges." But it's unlikely the footwear industry as a whole will resolve all of its logis- tics and transportation issues until sometime next year at the earliest. n footwearinsight.com July/August 2021 ~ Footwear Insight • 41 Small Apparel/Footwear Brand "Yantian (China) has repeatedly been a challenging port, but last week we unable to secure a single container/booking for a requested six bookings made for a total of 17 containers. This means literally zero of our goods moved that week, despite confirming to pay premium rates on them, which is roughly 8x our contract rates for 2019 & 2020." Mid-Size Accessories & Footwear Brand "So let's suppose that your normal contract port rate is about $3,000, the spot rate is $4,000, but to actually get the space and agreement to move it (finished goods), you may have to pay $7,500 and up… The analogy would be if the airline sold you a ticket at $500, later told you that you can fly standby for $1,000, but then making it plain that they will only give you the seat at $2,000 or more." Mid-Sized Apparel, Footwear, And Accessory Retailer "Even with paying a premium rate that was well over $7,000, we are still getting rolled. We were first told it would only last through Chinese New Year, but we are now in summer and the situation only seems to be getting worse. Contracted rates aren't being adhered to and causing unplanned expenses on retailers as wasn't included in the budget. In our opinion, the Carriers are taking advantage of the situation and increasing their revenue significantly only at the expense of us retailers. It is a blatant abandonment of their obligations under contract. Not to mention they are not even meeting their transits we signed up for so have had to relook at all our lanes and re- adjust which is a significant impact to our book drops and customer disappointment." Small Apparel & Footwear Brand "Our vendors place our bookings three weeks prior to planned cargo ready date right now, and even then equipment & capacity shortages cause most of them to not get a booking confirmation until just days before sailing. This forces them to have to react quickly, rather than work a proactive plan. It also forces us to regularly have to decide if we want to roll the dice & hope the booking comes through, or attempt to push for a premium rate booking instead. Doing that guarantees some delay, but at least gives us an eventual, confirmed sailing but at a massive price increase." Mid-Sized Private Label Footwear Manufacturer "The carriers are also using bigger vessels and adding special loaders to satisfy the demand, but this is causing issues at the port with the congestion. There is no space at the terminals. The carriers are overloading the terminals causing ETA delays of 2-5 days at the port so we are paying more and being further delayed. In Long Beach, as of yesterday, there were 31 vessels out at anchor waiting for berth space. No space means congestion and not enough appointments to accommodate the demand." n What the Brands are Saying About the Shipping Crisis In its five-page letter to President Biden on June 15 urging immediate federal action on shipping issues, the American Apparel & Footwear Association offered specific examples and anecdotes from seven members without identifying them by name. Below are some excerpts of what they had to say.

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