Closeout buyers are seeing unprecedented increases in shipping costs as container rates approach levels never seen before. Seasonal goods coming in at higher prices, or perhaps not coming until it's too late in the season, will have to be sold as closeouts if it is here to late for Holiday sales. Importers may be forced to sell excess inventory at even larger losses than usual due to the high shipping costs. When will this all end? Although there seems to be no signs in sight, surely the answer lies in the relationship of supply and demand. When enough importers call it quits and stop paying, rates will finally go down.
For closeout buyers who sell closeouts here in the States and don't deal with imports, we are still facing related issues that affect how we sell old merchandise and sell excess inventory. Those containers that aren't coming in from overseas are the same containers we use on the railroad. Closeout buyers are frustrated as well, with shipments we cannot send out or closeouts we cannot arrange to have picked up.
Our customers have empty shelves that need to be restocked, so although it can be easy to sell excess inventory it isn't quite as easy to schedule and ship it out. Rail rates from LA to Chicago that used to be in the range of $2500 to $2700 can cost up to $6,000 depending on how many pickups on the container. Then even when we book pickup dates they often roll in the the next day and the next, and again the next. All the containers slowed down and sitting offshore are the same containers we don't have for loading on the rail. In these challenging times it may actually be easier to sell old merchandise than ship the actual order.
In addition to U.S. distributors this is affecting all importers in some way, though some are feeling it more than others. For example, if you’re importing small and high value goods like computer parts, you might get 50,000 or more units in a container. Then $30,00 USD / 50,000 = 0.60 cents However, if you’re importing large outdoor lawn and garden products or furniture sets and you only load 200 units per 40ft container. Then $30,000 / 200 = $150 increase per unit! – A lot to pass onto the consumer and likely not sustainable. This creates slow selling inventory, leftover goods for the next season, and closeouts that must be liquidated for a loss.
What this means, is there is a global bidding war for shipping. If you’re a furniture importer importing from the China, your competition is no longer other furniture importers, as much as it is an importer of computer parts that is prepared to pay more to ship a container than you are. Unfortunately, all these extra expenses and delays in bringing goods in will force importers to sell old inventory for cash to raise funds. One by one, importers of low cost product from the China will start to drop out because they simply cannot ship their products, ultimately unable to pass on the price to the consumer. This will end with more companies liquidating and shutting down because they cannot compete.