Toy store owner Eric Masoncup is playing a high-stakes game as he readies holiday orders in this shaky U.S. economy: If he delays too long, he will not only pay higher costs to fly in goods, he risks late deliveries in the last-minute crush.
High unemployment and a stalled U.S. economic recovery are giving retailers few reasons to feel confident about their prospects during the fast-approaching holiday season.
“Every year at this time, you’re throwing the dice,” said Masoncup, who owns Geppetto’s Toy Box in Oak Park, Illinois, with his wife Brandy, and is still hoping for signals that will help him get his holiday order just right.
The couple is working hard to regain its footing after getting stuck with too many toys in the dismal holiday season following the collapse of Lehman Brothers in September 2008.
“I cut back last year. This year, I don’t know what to do,” said Masoncup, who will receive goods by air or from importers who brought goods in early by ocean transport.
Meanwhile, toy maker Hasbro Inc has been working since this summer to convince store owners to take early delivery of holiday shipments brought over months earlier than usual due to space shortages on ocean cargo vessels.
CHRISTMAS IN JULY?
It appears that Hasbro was not the only company doing some early shipping.
The Port of Los Angeles, the nation’s busiest container port and a major entry gate for apparel, footwear and toys, saw imports peak in June, July and August—months earlier than the traditional holiday peak in October.
“It was holiday in July,” said Kathryn McDermott, deputy executive director of the port’s business development group.
Import cargo volume at the nation’s major container ports is forecast to rise 15 percent this year to 14.5 million 20-foot equivalent units (a measure of cargo volume), according to a Global Port Tracker report released by the National Retail Federation and Hackett Associates.
“2010 has already hit its peak and numbers will decline through the remainder of the year,” the report said. While volume is expected to improve significantly from 2009, it would remain 12 percent below the high reached in 2007.
This time last year, ocean shipping was in the dumps. Container ship lines, which are estimated to have lost $15 billion globally in the crisis, parked hundreds of vessels and the two main container builders essentially shut their doors.
Port traffic peaked early because retailers wanted to guarantee space on a reduced number of slower-traveling ships and avoid hefty peak season surcharges, Hackett Associates founder Ben Hackett said. Inventory restocking and late deliveries also contributed, other experts said.
The early holiday haul included Christmas trees and holiday lights that will go on sale at Big Lots, the company’s merchandising chief, John Martin, told Reuters.
Dollar General Chief Executive Rick Dreiling recently told analysts the discounter has been bringing in merchandise early to avoid ocean shipping capacity shortages.
“Now you’re starting to see the seasonal merchandise start to roll in,” Dreiling added.
Air May Fare Well
While some retailers had holiday must-haves delivered early, many are reluctant to put all their cards on the table.
“Sales are quite depressed, they’re concerned going into it that it could be a disappointing holiday season,” said Dan Sellers, president of Pittsburgh-based Genco Transportation and Logistics.
The hesitation could be good news for air shippers like FedEx and United Parcel Service.
“In uncertain times, air freight is your mode of choice. When you have more confidence, you’ll see a shift back to ocean,” BB&T Capital Markets analyst Kevin Sterling said.
While the cost of air freight is much higher than ocean, Sherif Mityas, a partner in the retail practice at consulting firm A.T. Kearney, said the bigger risk to retailers who delay ordering is that they have too few items on hand during the holidays “because nobody was feeling that confident