Pandemic side effect: America's backed up ports
The historic backup at America's ports — critical entry points for sneakers or Peloton bikes — is having a boomerang effect on companies and shoppers.
Why it matters: The port chaos may get worse. More stimulus checks are coming down the pipe, pushing Americans to spend and order more.
What's happening: Port of Long Beach, the second-busiest after Port of Los Angeles, handled more containers last month than any other February in its 110-year history.
What they're saying: "The good news is the economy is getting better. People are spending money. Given the consumer demand, which is beyond what we expected, even if you go back six months, we do have challenges," Mario Cordero, the port's executive director, tells Axios.
Catch up quick: Bored-at-home Americans with more money redirected spending to online shopping — setting off a rat race to get products from overseas.
The problem: A shortage of containers that carry the stuff that's shipped to the states via sea. Containers that do get sent are tied up at America's busiest ports, where workers are overwhelmed in unloading them — making the backup and the container shortage worse.
Another way to think about it: It's like a crowded airport, Daniel Hackett of shipping consultancy firm Hackett Associates, tells Axios.
- "The previous plane is still waiting to depart a gate, and the plane you are waiting for has arrived but is forced to sit and wait for the gate to free up," Hackett says.
- More people are waiting around the gate — the ones waiting to board the delayed and upcoming plane, much like the containers left floating at sea, waiting for a berth at the port.
How it's playing out: The high demand means shipping costs are soaring — which may eventually get passed on to the consumer.
- The delays mean companies can't stock or re-stock shelves. Meanwhile, shoppers have less inventory to choose from — or their orders get delayed.
- Executives are mentioning the problem on earnings calls or investor conferences at the highest rate in at least 16 years, data from research platform Sentieo shows.
What they're saying: At Foot Locker, "inventory delays due to congestion at the domestic ports" prevented it from meeting consumer demand for footwear and other "comfort clothing," the CEO told analysts.
- It's caused delays for furniture, sporting goods, lawn and garden items at Costco, its CFO told Wall Street analysts last week.
- Worth noting: Companies like Gap turned to other options in lieu of the at-sea chaos, like more-expensive air freight.
The bottom line: The port havoc is showing up in companies' financial reports — and threatens delays not just for consumers, but for manufacturers waiting on imported parts.
What to watch: The retail industry expects shipping volumes to remain elevated for now. But the mass vaccination rollout is picking up speed and a return to normal could be nigh.
- That means people could start putting funds toward "travel, or things that don't require as much importing of merchandise," says Hackett.