Retailers Take to the Seas to Secure Holiday Inventory

By Alan Wolf, YSN

In a desperate attempt to keep their shelves stocked, some of the nation’s largest box stores have resorted to chartering their own container ships to assure sufficient supplies of Asian-made goods this holiday season.

According to a report in The Wall Street Journal, retail chains including The Home Depot, Costco, Walmart and Target are paying a premium to charter smaller vessels that can bypass clogged ports in Los Angeles, Long Beach and Houston for alternate facilities in California, Oregon or along the East Coast.

Related: California Ports Remain a Supply Chain Chokepoint

Freight forwarders contacted by the newspaper said such ships can hold about a thousand containers, compared to the 20,000 containers carried by typical transport vessels. This nearly doubles the retailers’ transportation costs, while the charters themselves run approximately $140,000 a day, shipbrokers noted, multiple times more than pre-pandemic rates.

Some of the chains are contending with the dramatically higher shipping costs by passing along the increases to consumers.

On a recent fourth-quarter earnings call, Costco CFO Richard Galanti said the wholesale club has chartered three transport ships and leased thousands of containers to crisscross the Pacific, which will account for under 20 percent of the company’s Asian imports. Though more expensive than shipping through Costco’s regular carriers, the charters give “us some amount of our total that we can control.”

Home Depot’s transportation VP Sarah Galica said the notion of chartering a ship almost began as a joke at the company but is now being used for the chain’s most in-demand products, such as plumbing supplies, heaters and power tools.

Walmart is no newcomer to the strategy, having chartered its own ships during the Los Angeles port strikes in 2012.  A spokesman said the discounter had resorted to sending its own employees to congested ports to help move things along and is now rerouting some of its chartered ships to smaller, less busy ports such as Mobile, Ala.

But chartering a ship simply isn’t feasible for small retailers like Podzly, a party-supply e-tailer in Papillion, Neb. Owner Jeremy Podliska only has half the inventory he was counting on due to shipping delays, and whatever he does have in stock cost him 55 percent more than he paid two years ago. Nevertheless, chartering a ship or an airplane is “just not an option for us,” he told The Journal.

Hat tip to The Wall Street Journal.