Retail Logistics: A Moving Trend

BY HAL ALTMAN

For the last decade, retail merchandise from the Far East was synonymous with the ports of Los Angeles or Long Beach. It was an accepted fact that merchandise being manufactured in Taiwan or China would move through these two major ports on their way to your favorite retail store.

In a peak year of 2006, over 15 million sea containers passed through these two ports forcing them to work 24-hour shifts, seven days a week. Thousands of applicants would show up for a hundred openings when these ports had to increase workforce. The retail economy was literally driven by the success and growth of these ports. Compare this to last year’s slump in retail and direct response business where these two ports handled a little over 11 million containers.

Run the calendar a mere four years and the impact looks completely different. Why? The economy and competition has reached out and given growth and opportunity to not only new American ports, but also sites in Canada and Mexico.

Ports in Vancouver, Canada; Manzanilla, Mexico and Lázaro Cárdenas, Mexico, are all now attracting retailers along with additional U.S. ports in the Gulf Coast and East Coast. Smaller ports in Savannah, Houston and New Orleans are bringing in merchandise on a regional basis.

IT’S A LOCATION MATTER
Retailers are willing to pay a little more and even wait longer for their merchandise, thinking that closer distribution hubs and stores are better than having everything coming through Southern California.

That’s all said and good for the steam ship companies and the ports receiving this additional work, but that doesn’t do anything for the logistics companies dealing in goods for both direct response and retail that previously came through Long Beach and Los Angeles ports.

The challenge to stay in business and profitable now requires the retail logistics divisions to provide their customers with multiple receiving and shipping locations close to these secondary ports.

Coupled with the additional costs of multiple warehouses, staff, overhead and the reduction of close to 30-percent shrinkage in overall container business, it now puts an even heavier burden on the existing companies dealing in both direct response and retail distribution.

It appears the major buying habits of most retailers won’t be changing until mid 2010 or closer to Christmas 2010, but it is never too early to prepare.

Direct response merchandisers have been trying to figure out if it is more cost effective to drop ship individual consumers and retail accounts from multiple locations with still no conclusive evidence either way.

With lightweight items (under 10 pounds) arriving on the West Coast and with favorable negotiated outgoing UPS/FedEx/USPS rates, it‘s not always a for-sure savings by taking the West Coast container cross country to drop ship zone 6-7-8.

Combine high costs of fuel and rail charge, sending 10 or 20 containers a month to various locations in the Midwest or East does not always look as good as it sounds.

Major direct response merchandisers selling to retail can easily use up to 50 containers a month (depending on item cube and weight) and multi-warehousing becomes a costly and timing issue.

It is easier to process regional orders for retailers if the merchandise is “store” ready and does not have to be tagged, sorted, re-packaged or configured, or in need of any additional value-added services.

It is important as a merchandiser—who combines direct response with traditional retail sales or chooses one versus the other—to bear in mind the logistics of where, how and when your merchandise arrives. Consider the many costs and demands of your customers, and then match these to your logistics provider.

Hal Altman is president and co-founder of Motivational Fulfillment and Logistics Services in Chino, Calif. He can be reached at (909) 517-2200.