While it seems like the world couldn’t get more turbulent, retailers are now facing another challenge in their supply chains: Since mid-November 2023, the Yemen-based Houthi rebel group has been attacking merchant ships in the Red Sea. This is another case that will potentially disrupt business operations and increase prices for consumers.
According to media reports, the Houthis said their militant attacks were mainly directed against ships carrying Israeli interests and that they would continue these attacks until the country ended its war in the Gaza Strip. Given the escalating situation, the UN Council of Secretaries called on the Houthis in a statement to “immediately cease all attacks” while other global organizations sought a quick solution.
However, the concern for retailers now is the potential delays these attacks could have on their supply chain if a solution is not found soon. The Red Sea – and the Suez Canal – are considered one of the most important transport routes for the global shipping industry. Experts believe any long-term disruption could ultimately lead to higher costs across the global economy.
Shipping companies are considering diversions and freight alternatives
In light of the attacks, major shipping companies such as Maersk and Hapag-Lloyd are already being forced to abandon the Suez Canal, the shortest route from Asia to Europe, and instead sail around Africa, adding around ten days to the journey. It said companies are also considering moving goods from China to Europe and the US via alternatives such as rail and air, which could put renewed pressure on prices.
This is a possible fallback plan for Polish clothing manufacturer LPP, which owns brands such as Reserved, Mohito, House, Cropp and Sinsay. The company told Reuters that it was considering such alternatives for its “most urgent” collections. Concerns were also raised by British retailer Next, which said that while delays were more manageable than those caused by the pandemic, previously placed orders and the use of air freight to get products out of Asia, where the Most of the inventory is sourced.
In a statement to Reuters, Next Chief Executive Simon Wolfson said there could be delays of up to three weeks for goods to arrive in Britain and that this could hit sales growth. The company had already highlighted this in its trading report earlier this month, warning: “If difficulties in accessing the Suez Canal continue, delivery delays are likely to occur at the beginning of the year.”
“When I look at our inventory today, it’s probably 15 to 17 times the amount we sell in a week. So if two weeks of that are late, that means inventory levels aren’t optimal, but it’s not like you don’t have anything on the shelves,” Wolfson added.
This article originally appeared on FashionUnited.uk. Translated and edited by Simone Preuss.