As we navigate along the downslope of 2022, the good news is that global shipping costs are starting to drop. “But it will take far more than a bit lower shipping rates for normalization of the marketplace,” believes Omar Zambrano, chief operating officer of Civalogistic Group, who oversees operations for subsidiary Civalogistic. “Realistically, for the remainder of this year and into 2023, we may be looking at a different version of normal. That’s based on continuing limited shipping capacity and supply chain issues, trends in retail inventory management, and global economic fluctuations.
Of course, on the “good news” side, any drop in shipping costs is a positive development for business customers, both on the wholesale and retail sides. “Over the past two years, our business customers have been hit hard with significant price increases for everything from shipping containers to transportation of goods via air, sea, rail, and road,” Zambrano says. “Definitely, lower shipping rates for certain services are a plus. Civalogistic does everything possible to assist clients in getting the best rates for transporting their goods from farm or manufacturing facility to market.”
But the reality is that much has changed during the pandemic in retail industry management. Who could have predicted runaway consumer spending during the “buy-buy-buy” era of consumer lockdown? As consumers were forced to work from home and avoid public places, they tapped into government stimulus checks to buy electronics, home goods, and outdoor furniture and grills – all designed to make the home stay more comfortable. It made them feel better about themselves and their unfortunate circumstances.
Not yet Back to Normal
Not surprisingly, for the retail industry system that’s meant massive demand for consumer goods over the past two years – sending prices soaring and stressing the supply chain. It’s not yet back to normal. For example, consumption of durable goods rose some 35 percent in 2021, yet while that dropped in 2022, it’s still higher than in 2020. “Our frustrated clients – wholesalers and retail businesses – have dealt with everything from goods shortages given supply chain issues to panic buying on the part of consumers,” he points out.
Now, the economy is also showing signs of stress, as reflected in corporate earnings reports. Higher prices at the gas pump and grocery store, not to mention soaring apartment rental rates and home purchase prices are complicating the economic outlook. Some big-name retailers have issued reduced profit expectations. Most notably, most stores have adjusted their retail inventory management strategies to adjust to incredible changes in consumer purchasing behaviors.
“One interesting market shift reported by our clients is that more and more, their customers are cutting out discretionary purchases,” Zambrano emphasizes. Unlike early in the pandemic, consumers now are buying fewer electronics, home goods, outdoor furniture, and other discretionary items. Instead, they’ve shifted their purchasing focus to household essentials and beauty products. It seems that both men and women want to look nice under any circumstances.
It’s a New Territory
But the job of “how to manage retail inventory” is in new territory. This summer consumers are still splurging but in a different way. They’re not fixated on buying “stuff” but instead on creating “memories” or “experiences” that they feel they deserve. For example, both domestic and international travel is booming. Consumers are exercising their strong pent-up demand to reconnect with family and friends and have a great time together, after so much time spent apart. They also want to see the world now, not wait for a better time.
Proof of that is Target’s luggage sales which grew by half in the first six months of 2022, while Samsonite International, which produces the Tumi and American Tourister brands, has posted a 75 percent increase in quarterly sales from a year ago. But what goods will consumers turn to next? What will they seek out? Right now, that’s unknown.
“As the critical holiday season, a ‘make-or-break’ period for our wholesale and retail customers approaches, it’s hard for those companies to know what type of merchandise to order,” says Zambrano. Some retail products aren’t moving off the shelves as quickly as stores would like, attributable to those changes in consumer purchasing behaviors. That’s a dilemma for any retail inventory system.
Mismatches in Supply and Demand
“In a sign of voracious retail industry management, we’re hearing from our clients that they’re marking down inventory to clear out merchandise that was popular with consumers just a year ago but not now,” he stresses, adding that “some retailers are also canceling orders already placed with manufacturers or wholesalers.” So, while retailers desperate for inventory are getting their goods more reliably than a year or so ago, mismatches in supply and demand still exist.
Yet, import levels still remain above 2019 levels. Civalogistic Group also knows that most of its customers are working extremely hard on the retail inventory management side to adjust to unusual shifts in 2022 market conditions. That said, “one big plus for our clients is that we do much more than simply get goods from Point A to Point B,” emphasizes Zambrano. “Increasingly, our Civalogistic Group team members are putting on their ‘consultant’s hats’ to help customers.”
It’s All About Relationships
Yes, logistics, shipping, and handling are Civalogistic Group’s specialties, and its professional, experienced team members strive to assist customers with the best, most time-sensitive, and most efficient way to ship their goods. In addition, real-time availability can provide peace of mind. “But we’re also all about relationships,” notes Zambrano.
“So, we’ve adjusted our business model to help clients navigate 2022’s ups and downs and provide advice as they tackle new challenges in retail inventory management,” he notes. “Of course, we don’t have all the answers, but we certainly will share our thoughts and provide any marketplace insight that can help our customers.”
About Prospect Shipper Group
One of four divisions of Civalogistic Group, an international logistics services conglomerate founded in Ecuador in 2001, Civalogistic Group serves to streamline, optimize, and expedite freight to and from the U.S. for a wide range of major industries.
With offices in Miami, New York, Los Angeles, Bogota, Quito, and Amsterdam, Civalogistic capitalizes on its long-time relationships with the major air carriers and ocean lines to offer competitive rates in securing ample space to destinations all around the world.