The coronavirus is working its way back to the supply chain.
Already the outbreak has forced fashion retailers to close in much of China while grounding the luxe shopper with travel restrictions. Now the fallout is making its way to the shipping world, where the supply chain strain is starting to become more clear.
The coronavirus is contributing to a projected 12.9 percent slowdown at U.S. ports this month, according the National Retail Federation’s monthly Global Port Tracker report, produced in conjunction with consultancy Hackett Associates.
The ports are expected to see roughly 1.41 million twenty-foot equivalent units this month — well below the 1.54 million TEU projected prior to the outbreak. (The metric looks at the volume of goods within a 20-foot-long cargo container). The NRF projections cover imports that arrive through about a dozen major U.S. ports, including in Los Angeles, Seattle, New York, Miami and Houston.
The effect on the supply chain more broadly may be harder to quantify at present, though it’s expected to ripple through various parts of the shipping process, said Jonathan Gold, the NRF’s vice president for supply chain and customs policy.
“It’s not just the factories that are affected, but the infrastructure, too — the ports, vessels, trucking — all the ancillary services associated with cargo movement,” he said. “Everybody is still in the assessing stage, and trying to figure out what the impact is going to be, and what contingency plans can be made to avoid shortages on store shelves — which nobody expects at this point.”
The NRF is also surveying its members to learn how factory closures in China may be affecting production elsewhere, said Gold.
“There are factories around the world that rely on components from China — whether it is raw materials or other inputs that could have an impact as well,” he said.
The impact is starting to become more clear all around.
“If you thought two weeks ago that this would maybe be a temporary issue and that in a couple of weeks things would be up and running, it now feels like this is going to be a longer-term issue,” said Karen Giberson, president of the Accessories Council.
“From all aspects, from retail to sales there to even developing future product, it looks like it’s going to be compromised for the foreseeable future,” Giberson said. “I think we will see disruption immediately and down the line because all products developed now or placed now will be potentially delayed. I’ve heard a number of factories are delaying opening after the holiday.
“It’s the synthetic bags that are harder to create in other places; the raw materials aren’t available,” she said. “Even if you are making things in other countries, your components will be delayed.”
At the recently completed MAGIC show in Las Vegas last week, 40 percent of the exhibitors within the Sourcing section of the show were unable to make the trip due to the travel ban from Asia, according to Tom Nastos, chief commercial officer of Informa Markets Fashion division.
It seems the coronavirus — and its many disruptions and threats — is a topic that cuts across the industry, from shipping experts to the trade show circuit to executives at New York Fashion Week, who were swapping stories and worrying over their next shipment and the one after that.
Their compatriots in China may have to wait to swap supply-chain woes. WWD has learned the upcoming fashion weeks in Beijing and Shanghai will be postponed in light of the outbreak.
Shanghai Fashion Week was supposed to start March 26, and Beijing’s China Fashion Week would run from March 25 to 31.
No new dates have been revealed, as designers, trade show owners, fashion week committees and the local governments have not yet been able to agree on a time slot that would still make sense for brands to sell and be safe for the government to approve.
In recent years, Shanghai Fashion Week has risen to become one of the most powerful regional fashion weeks with a big talent pool and strong Chinese spending. It hosts the biggest fashion trade fair in Asia. More than 1,700 brands participated in seven of the official showroom and trade show events last season. Meanwhile, Beijing’s China Fashion Week aspires to attract young designers and gain international appeal to make itself more relevant to the global fashion community.
Meanwhile, Chinese buyers and executives are not traveling to the overseas trade shows and fashion capitals for the designer runway shows, since in some cases countries have banned Chinese visitors.
Most of China went back to work on Monday after the Lunar New Year holiday, but many fear that the increased traveling could bring a second wave of cases.
The usual Lunar New Year holiday spans about a week, although in practice the holidays and related closures go on for longer. This time, those closures have been extended further, without a clear end in sight.
There were at least 37,558 confirmed cases of the virus as of Sunday, according to the latest situation report by the World Health Organization, which is based on government information. Most of those cases are in China, where there have been at least 812 deaths as a result of the virus, according to the WHO report.
Ports in the U.S. are generally getting their cues from government agencies responding to the outbreak, including the U.S. Coast Guard, as well as their group The American Association of Port Authorities.
The U.S. Coast Guard also has a captain of the port at each port, which serves as a way of sharing information from the feds to ports.
The NRF report does project that imports will pick up in the coming months, albeit with the disclaimer that “the duration of the coronavirus impact remains unknown.” The report estimates April’s imports to pick up to 1.82 million TEU, a 4.5 percent increase from last year, and imports for May to rise to 2 million TEU, 8.3 percent increase from last year.
“Projecting container volume for the next year has become even more challenging with the outbreak of the coronavirus in China and its spread,” said Ben Hackett, founder of Hackett Associates. “It’s questionable how soon manufacturing will return to normal, and following the extension of the Lunar New Year break all eyes are on what further decisions China will make to control the outbreak.”
China is not as big a fashion importer as it was, but it is still the number-one player, accounting for 29.7 percent of all apparel shipments to the U.S. last year.
A slowdown in shipments from China would wreak havoc on business plans and also create potential opportunities if brands or retailers run out of goods.
Asked about inventory levels on a conference call last week, Timothy Boyle, chief executive officer of Columbia Sportswear Co., said the outbreak would “be likely impacting the importation of new products.”
And Boyle suggested this is not a bad time to have a little extra stock on hand.
“If we have inventories in line with good product today, we think we’re in a superior position than somebody who might be sold out,” Boyle said.
While companies of all stripes are scrambling to adjust where they can, supply chains can only be shifted so fast and many are going to find themselves in the same boat.
Mika Rautiainen, ceo of Finnish retailer Tokmanni Group Oyj had a similar outlook, noting that its important shipments for the spring season have already come in or are en route, but that the company is bracing for possible impact down the road.
“We follow this very closely, what’s the development, what’s the situation when it comes to the coronavirus and the Chinese environment,” Rautiainen said in a call with analysts Friday. “At the moment, we don’t have difficulties with that, but we see that if it continues, then, of course, there will be like difficulties, I would say, globally.”
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