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Aid’S $1.5m Reason For ‘No Christmas Stock Shortages’

• Retailer pledges it will overcome global supply woe

• IMF predicts 5% local inflation - highest since 2013

• President ‘travelling almost every week’ to source

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A major Bahamian retailer yesterday pledged there will be “no Christmas inventory shortages” despite ongoing global supply chain disruption, with $1.5m in merchandise due to arrive this month.

Jason Watson, Automotive Industrial Distributors (AID) president, told Tribune Business he has been “travelling almost every week” in recent months to meet with suppliers and ensure the company has access to alternative products and channels should the need arise.

With global supply chain bottlenecks, and fears of product shortages, already resulting in panic buying and empty shelves in major markets such as the UK, he revealed that a shortage of US drivers had prompted AID to begin shipping product direct to Nassau from New York/New Jersey rather than trucking it to Jacksonville as was done previously.

As for shipping from China, Mr Watson said container costs had increased by up to 149 percent since the supply chain squeeze began. Containers that had previously cost AID between $7,500 to $8,500 are now fetching $18,700, he disclosed.

Such cost spikes ultimately feed into the price of goods in The Bahamas, given that the country imports virtually everything it consumes. The International Monetary Fund (IMF) yesterday predicted that consumer prices in The Bahamas, which measure inflation, will increase by 5 percent this year - the greatest rise since 2013.

Mr Watson said there was “a lot of pressure on profits” at AID as a result, with the retailer “absorbing a number of additional costs” that it never previously had to. As a result, it was doing its best to hold the line on consumer prices, although the ultimate impact depended on the goods held in each particular container.

The AID chief explained lower-value items are more impacted by the spike in freight costs, as the latter are close to matching what the shipment is actually worth. He added that the retailer was waiting until these goods arrive in The Bahamas, and clear Customs, before determining how to price them.

Acknowledging the supply chain disruption, Mr Watson told Tribune Business: “It’s not going to be a huge impact for our company. We have a lot of merchandise arriving right now, a lot of containers arriving right now.

“It’s going to be a few things we’re out of stock on for two to three weeks or so, but we’ve found a lot of substitutes for those things. I’m travelling, trying to find substitutes for products we will run out of. It’s mainly housewares but, for the most part, it’s four containers we have stuck in China.

“Everything else we’ve been able to ship. When you put that into perspective, it’s not a lot of containers. We’re hoping to get them shipped in a couple of weeks. I think it’s almost every week I’ve been travelling. It was only one week when I didn’t.” 

Mr Watson added that some $1.5m worth of inventory was due to arrive this month, and said: “We’re not going to have any shortage of inventory for the Christmas season. A lot of products we ordered since December last year, January this year, even though they are late will still be in time for Christmas.”

Noting that the global supply chain had seemed on the verge of sorting itself in May, as pricing came down and containers were shipped more quickly, the AID president recalled how “things suddenly went way worse than it was before” with container price hikes that he had little choice but to accept.

As a result, Mr Watson said he had embarked on sourcing product from other areas, such as the US and Panama, to act as both a substitute for inventory not obtained from traditional sources and as a counterweight to shipping costs from China.

Amid the switching of suppliers, he added that US inland haulage rates “went sky high” due to the post-COVID driver shortage. Instead of trucking product from New Jersey to Jacksonville, and then shipping to The Bahamas, as AID had done previously, Mr Watson said it was now shipping direct to Nassau from New Jersey via ocean freight.

“The thing about it is it’s not just the rate; you cannot get drivers to move the load,” he revealed. As for Chinese shipping rates, AID is currently paying $18,700 per container compared to $7,500-$8,500 prior to the supply chain disruption - a cost increase of between 120 percent and 149.3 percent.

Mr Watson revealed that AID had “accepted it” when container prices went to $10,000 and $12,000, but baulked at paying $13,000 believing the costs were “kind of crazy”, only to be forced into paying even higher costs when it became clear prices were not coming down.

Post-COVID shipping costs having escalated due to a global container shortage, while pandemic-induced supply chain disruption has left many factories and producers unable to meet strong demand given that they have first been forced to fulfill order backlogs. These are the prime factors behind the supply chain bottlenecks.

“We’re definitely absorbing some of the cost,” Mr Watson told this newspaper, adding that it was “difficult to say” how Bahamian consumer prices will be impacted.

“It depends on the value of goods in the container,” he explained. “If the value of goods in a container is very high, it will not have much impact, but if there is a container of low-value comforters worth $20,000 against an $18,700 container.......

“Customs charges $500, there is the attendance fee, road tax and you have to pay the haulage charges. You’re almost paying as much in freight as what the goods are worth. For those goods, we will make a decision on how we handle it [the pricing] when they arrive. The extremely high-value containers, $60,000 to $80,000, will not have as much effect on cost.”

Conceding that it will be “very difficult for us to absorb all these costs” in some product categories, Mr Watson told Tribune Business: “There’s a lot of pressure on profits right now. We have higher payroll costs we continue to pay, we had expected to move staff into our new Blue Hill Road location by now, and are paying staff with COVID-19 for the two weeks they are out of work.

“There’s a number of additional costs we are absorbing at this time that we did not previously have to absorb. There’s a lot of pressure on profits.” Mr Watson said the supply chain disruption may last into mid-2022, although others are predicting it may cease by February/March of next year.

AID is far from the only Bahamian retailer enduring supply chain challenges. Tara Morley, a Bahamas Federation of Retailers co-chair, recently told consumers not to “under-estimate the resourcefulness” of local merchants, asserting that the industry will do everything it can to ensure Bahamians “have as many options as possible for the Christmas season”.

And Andrew Wilson, the Quality Business Centre (QBC) and Fashion on Broadway principal, told Tribune Business he was “trying to hold the line” on passing price increases on to Bahamian consumers this holiday season as a result of the near-tripling in container shipping costs.

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