Technical recession creates opportunities for retail
By Denys Hobson, Investec for Business, Head of Logistics. A decline in global demand brings opportunities for importers and retailers to capitalise on a calmer supply chain.
By Denys Hobson, Investec for Business, Head of Logistics. The economy is on the verge of a technical recession and service delivery has deteriorated, thus adding additional pressure to business and people. Inflation has remained stubbornly high in SA since peaking in July 2022 at 7.8%, leading to a run of interest-rate hikes by the SA Reserve Bank. And there seems to be no ease in loadshedding which continues to have a negative impact across the board.
Despite this, while we cannot ignore the uncertainty that’s been created by current economic and political trends, both globally and locally, there appears to be a greater sense of calm across the air and sea freight markets – which brings good news to importers and retailers.
One of the driving factors that have created this sense of calm is the decline in global demand and the likelihood that demand will remain subdued in the coming months. So, while this doesn’t bode well for economic growth, it does mean that we can expect market conditions for air and sea freight to remain stable.
The market appears to be stable and back to the “good old days…”. Port congestion across the globe has also subsided for the most part and vessel schedules have become more stable. This is all very encouraging and positive from a supply chain and logistics point of view. In fact, according to the latest Sea-Intelligence schedule reliability report, global schedule reliability improved by 7.7% to 60.2%.
With that being said, previous experience has taught us that this can change overnight and should carriers start introducing blank sailings at short notice this may result in some changes but for now retailers and importers would do well to take hold of the opportunity and secure space and equipment at competitive rate levels.
Despite the recent strikes in Germany and France, air freight remains stable. In fact, currently the market conditions are favourable for importers in terms of price and capacity availability. There is sufficient capacity available with minimal backlogs reported. As the European summer approaches, we expect demand for passenger travel to increase, which will however reduce cargo capacity availability on passenger aircraft and so ensure you take the time to look at optimal routings and rates to meet your supply chain requirements.
We have known the trade sector to be greatly influenced by global and local market conditions, so my advice is pay very close attention to market conditions and factors across the globe and do scenario planning to ensure your business remains agile and adapt quickly to change. Work with an import partner that has an in depth understanding of the various trades and can support your business requirements when changes or disruptions occur both globally or locally.
Without jinxing the market, it may appear that now is an opportune time for retailers to take advantage of the calmness in the market, the softened rates and the stability across most routes.
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