Retail imports continue to slow as supply chain issues resolve

The nation’s largest ports are expected to slow down for the holiday season.

Imports remained off their record pace from earlier this year in the fall, as retailers ordered ahead for the holidays this year and consumer demand fell back from its mid-pandemic peak. That’s according to the latest data from the Global Port Tracker report released this week by the National Retail Federation and Hackett Associates.

Consider this: The ports covered by the Tracker handled a record 2.4 million Twenty-Foot Equivalent Units (TEU) in May.

In September, the import levels were down to 2.03 million TEU. That was a decline of 10.2% from the previous month, and a drop of 4.9% on a year-over-year basis.

September is the latest month for which data is available. In October, the report projects that ports will receive 2.02 million TEU, while in November they are expected to handle 1.92 million TEU, which would be the lowest volume since February 2021.

The pullback comes after a year of supply chain snarls that left a lineup of cargo ships at ports. Now, the backup at the Port of Los Angeles and Long Beach that peaked at 109 ships is down to four, the Wall Street Journal reported.

The Global Port Tracker’s latest readings offer evidence that this is in part due to fewer goods being shipped from Asia. There are signs in holiday forecasts that demand is coming down, too. NRF projects that holidays sales are expected to grow 6-8% on an annual basis in 2022. That would be above-average growth in any year before 2020, but it would be down markedly from 2021’s record growth of 13.5%.

In part, this is the result of a year in which the typical cadence of shipping flows were flipped on their head.

“Cargo levels that historically peak in the fall peaked in the spring this year as retailers concerned about port congestion, port and rail labor negotiations and other supply chain issues stocked up far in advance of the holidays,” said NRF Vice President for Supply Chain and Customs Policy Jonathan Gold, in a statement. “With a rail strike possible this month, there are still challenges in the supply chain, but the majority of holiday merchandise is already on hand and retailers are well prepared to meet demand.”

Retail imports, 2004-2022. (Courtesy photo)

The move to stock up has created inventory issues at some of the largest retailers. Most recently, Nike executives said that multiple seasons of inventory arrived at once, as transit times ebbed and flowed, while the brand sought to get an early jump on the holidays. Now, alongside getting peak season underway, it is embarking on a markdown campaign to move the excess merchandise.

“This reflects the combination of late delivery for the past two seasons, plus early holiday orders that are now set to arrive earlier than planned and a prior year that was impacted by factory closures in Vietnam and Indonesia,” Nike CFO Matt Friend said on the company’s September earning call.

Looking beyond the holiday season, the first months of 2023 are also projected to see import declines from the year prior. February is projected to be the slowest month since June 2020, when demand for goods was just ramping up, according to the Global Port Tracker's forecast.

“We expect the flattening of demand that began around the middle of this year to continue into the first half of 2023,” said Hackett Associates Founder Ben Hackett, in a statement. “This will depress the volume of imports, which has already declined in recent months. Carriers have begun to pull services and are looking at laying up ships.”

In a silver lining, the price of shipping a container has fallen significantly. According to the World Container Index from Drewry, the price of a 40-foot container was down 67% year-over-year on Nov. 3 to $3,050. The September 2021 peak was $10,377.

We'll see if these conditions translate to less ordering ahead among brands and retailers, or if the behaviors learned during these unprecedented times become normalized, and alter the calendar more permanently.