While it may appear that the world could not have become any more tumultuous, retailers are now facing another challenge against their supply chain. Since mid-November 2023, the Yemen-based Houthi rebel group has been attacking commercial ships in the Red Sea, in what is yet another instance that possibly threatens to disrupt business operations and increase consumer prices.
In media reports, the Houthis have said their militant attacks are largely directed at boats with Israeli interests, and that they would continue to pursue such strikes until the country ends its war in Gaza. As action continues to escalate, the UN Secretary Council issued a statement demanding for the Houthis to “immediately cease all attacks”, while other global organisations scramble to ensure a quick solution.
For retailers, however, the concern now is the potential delays these attacks could have on their supply chain, if a resolution is not found shortly. The Red Sea – and the Suez Canal – is considered one of the most important avenues for the global shipping industry, with experts stating that any long-term disruption could ultimately lead to higher costs throughout the global economy.
Shipping companies mull reroutes and freight alternatives
In light of the attacks, major shipping companies such as Maersk and Hapag-Lloyd have already been forced to reroute away from the canal, the shortest route from Asia to Europe, instead going around Africa, adding about 10 days to the journey. Companies are also said to be considering transporting goods from China to Europe and the US through alternatives like rail and air, once again putting possible pressure on prices.
This was a potential back-up plan for Polish retailer LPP, which told Reuters that it was considering such alternatives for its “most-urgent” collections. Concerns had also been raised by British retailer Next, which said that while the delays were more manageable than those resulting from the pandemic, earlier ordering and the use of air freight were being considered in order to get its products out of Asia, where it sources most of its inventory.
In a statement to Reuters, Next’s chief executive officer Simon Wolfson said that if the issue was to persist, there could be delays of up to three weeks for stock arriving in the UK, and therefore the potential to “moderate sales growth”. This was something that had already been outlined in the company’s trading update earlier this month, in which it warned: “Difficulties with access to the Suez Canal, if they continue, are likely to cause some delays to stock deliveries in the early part of the year.”
Wolfson added: "If I look at the amount of stock we've got today, it's probably about 15 to 17 times the amount of stock that we sell in a week. So if two weeks of that is late, it means your stock levels are not optimal but it's not like you've got nothing on the shelves."