Online shopping has transformed the way consumers purchase everything from electronics to clothes, toys and a host of other goods. It has also impacted the way retailers are doing business. Instead of stocking their stores up with merchandise, they are housing more goods in warehouses in order to quickly ship to stores or fulfill online orders. This has ports on both coasts worried about activity they will be seeing during the traditional peak shipping season.
According to a recent article in the Wall Street Journal, the shift in how retailers are stocking up on inventory has caught the transportation sector off guard. “Ports from New York to Georgia to California have spent billions of dollars to upgrade equipment and deepen harbors to handle an expected flood of imports that has yet to materialize. Shipping lines are scrapping vessels and cutting back service on unprofitable routes. Trucking companies bought tens of thousands of new big rigs as recently as 2015, many of which sit idle today,” cites the article.
In fact, according to consulting firm Hackett Associates LLC, U.S. ports are set to handle 2.2% more imports this year, which is the slowest rate of growth since 2011. Additionally, the volume of imports coming into Southern California and New York, two of the country’s major ports fell overall in August, at a time when retailers are already concerned over complications wrought by the bankruptcy of South Korean ocean shipper Hanjin. The National Retail Federation has estimated the year-over-year August decrease would be close to 0.4%. But the volumes entering Southern California were much lower, and the effect of Hanjin’s bankruptcy won’t even be reflected in ocean import volume reports until September, according to JOC.com, making the August slump even more worrying.
The slowdown has not only affected ports but has also extended to the nation’s highways and railroads. Freight carried by road and rail fell 2.6% in July compared with the same month in 2015, the 17th consecutive month of year-over-year declines, according to data company Cass Information Systems Inc.
What is the long-term view? Retailers will need to step up imports as they run through inventories, especially if consumer demand continues to stay strong, but it’s unlikely that the ports will be returning to double-digit percentage growth, according to international trade economists.
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