Why Apparel Brands Should Start Back-to-School Orders in April

Glenn Taylor
·4 min read

The dueling crises arising across both the Suez and Panama Canals means apparel retailers may need to finalize their back-to-school—and even holiday—buying decisions as early as this spring.

Due to the overall seasonality of apparel supply chains, potential delays stemming from disruption at both waterways will become a bigger factor during the July-to-September peak shipping season, according to Chris Rogers, head of supply chain research at S&P Global Market Intelligence.

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“Given shipping times of around five to six weeks normally have likely increased to at least eight weeks, that would suggest winter peak season shipments need to leave Asian ports from mid-May 2024, requiring purchase and production decisions to be made in April at the latest,” said Rogers in a recent research note Wednesday.

Rogers noted that the impacts could affect the stretch from back-to-school season all the way to Black Friday.

European brands and consumers continue to see more of an impact from the disruptions than their American counterparts.

According to data from S&P Global Market Intelligence, ocean shipments from Asia that may need to use the Suez or Panama Canals accounted for 51 percent of E.U. imports of apparel and footwear in the 12-months to Nov. 30, 2023.

In the case of the U.S., this ratio is much lower at 30.7 percent, with only shipments to the U.S. East Coast counted in the data.

Rogers said that adapting logistics strategies would help businesses manage future inventory risk, noting that more U.S. importers can opt to ship more goods from Asia to the U.S. West Coast in an effort to avoid both sets of canal challenges.

This shift appears to already be taking place again amid concern that the East and Gulf Coast ports could go on strike in fall 2024.

The proportion of U.S. apparel imports headed to the West Coast ports increased to 63.1 percent in January 2024, the highest share since November 2021. There had previously been a downturn in shipments to the U.S. west coast due to concerns about strikes, which crystallized in summer 2022.

Air freight is likely to be capacity-constrained by the likes of Temu and Shein, which move a combined 9,000 metric tons per day via the transport method. But with the use of air freight tending to be highest during the spring/summer peak, brands may need to find ways to secure air cargo capacity earlier, capacity earlier, or use air freight more frequently over a longer period of time.

“It may be a few months before the true picture of air freight adoption becomes clear,” Rogers said. “Shippers into Europe also have the option of using land transportation from Asia, most notably using rail freight. The capacity on such alternatives is minimal and apparel firms will need to compete for capacity with potentially deeper-pocketed automotive sector users.”

Aside from advocating brands to change transportation routes or modes, Rogers said apparel sellers should focus more on carrying more inventory and altering sourcing practices as they arm themselves against more potential supply chain disruption. At the same time, he acknowledged that boosting inventories and diversifying supplies would cut supply chain risk, but also add costs in an environment where freight rates and fiber prices are up from last year.

Inventory numbers have fallen significantly since they had dealt with excess merchandise throughout 2022 in the wake of heavy e-commerce demand. The inventory-to-sales ratio of the 50 largest apparel firms globally fell to 73.6 percent in the past quarter, down from 78.1 percent a year earlier but above the pre-pandemic level, according to S&P Global data.

The data says apparel businesses don’t seem to be diversifying as much either. Diversification, measured by suppliers per buyer in U.S. import data, fell to 81 percent of the 2019 level in 2023. Compare that to 2022’s 129 percent, indicating that the year-over-year reduction of suppliers per buyer is likely linked to cost cutting.

Egypt eyes Suez Canal expansion

With the Red Sea disruptions preventing maximum traffic from entering the Suez Canal, Egypt is seeking out ways to further expand the waterway’s second channel. This move would set the stage for the canal to allow for higher volumes of cargo and prevent more potential blockages.

The project is meant to turn single-lane segments—50 kilometers (31 miles) in the northern segment and 30 kilometers (19 miles) in its southern part—into double-lane crossings, said Suez Canal Authority chief Osama Rabie said during the annual International Maritime Transport and Logistics Conference (MARLOG) Sunday.

The project idea has been in place since the Ever Given container ship blocked the Suez Canal in 2021 for six days, halting traffic on the shortest shipping route between Europe and Asia.

Initial studies on an additional expansion would take about 16 months, and would include feasibility, environmental and engineering studies, as well as soil and dredging research.