Retail season: A fine balancing act
By Denys Hobson, Investec for Business, Head of Logistics. There are a number of macro aspects on the radar for retailers, coupled with local operational concerns, before the retail season kicks off.
By Denys Hobson, Investec for Business Head of Logistics. As our country grapples political instability, volatile currency, higher interest rates, economic growth, and loadshedding, while businesses have certainly felt the strain, many have also sought out opportunities and adapted, and worked on controllable aspects to mitigate additional risk and survive the tough economic climate.
With consumer confidence sitting at minus 25 points, from minus 23 points in the first quarter of 2023 – there is also no doubt that disposable income is shrinking and unemployment levels remain too high. Consumers are buying less, which means that products are either staying longer on retailers’ shelves and impacting stock turns or becoming obsolete. This has a negative impact on retailers bottom line and often leads to higher inventory levels, meaning cash is tied up Retailers need to be disciplined with spending and innovative in pursuit of attracting consumers while protecting their brand integrity.
Sea freight forecasts
The past few years have been disruptive for supply chains and while there have been declines in freight levels, sufficient capacity availability and improved schedule reliability, shipping lines are coming under revenue pressure due to the global economic conditions which has resulted in shipping volumes declining and therefore limiting opportunity to increase rate levels.
Locally, imports have been impacted by vessel berthing delays caused by severe weather conditions and operational issues inside the port. Cape Town port has been impacted the most, experiencing extended berthing delays which has forced shipping lines to omit the port or re-route cargo to compensate. One can expect import rate levels to increase for Cape Town as they incur a higher cost to service this port.
As the traditional peak shipping season approaches, that being towards the annual Chinese Golden Week and Black Friday period, capacity demand will increase and shipping cargo on time will be crucial to ensure stock arrives at the right time especially for Black Friday sales when we can expect consumers to splash out on deals .
Because Chinese Golden Week was observed from 1 – 7 October in 2023, the demand for capacity leading up to this period increased. Carriers are likely to implement blank sailings in the first two weeks post Golden Week which will reduce capacity availability on this trade for the month of October and likely see carriers’ ceasing the opportunity to increase freight rates.
The demand for airfreight has also been relatively sluggish. With the sea freight market stabilizing and high inventory levels among businesses, demand for airfreight has retracted the past few months We anticipate demand to start picking up now, and into Q4.The market has enough capacity to meet existing demands, and airlines have increased flight frequencies to accommodate the increase in demand for traveling passengers.
Although rates may have remained stable with spot rates declining on some trade routes, rate levels will likely increase in the coming months as demand increases. There is no doubt that there are a number of macro aspects on the radar for retailers, coupled with local operational concerns, but with key retail days just round the corner, and the opportunity to drive revenue, having a keen eye on market movements and risk factors becomes critical.
Receive the Retailing Africa newsletter every week • Subscribe here