Dive Brief:
- Over 100 business groups representing apparel, retail, footwear and other industries issued an open letter last week calling on governments around the world to secure trade on the Red Sea.
- “As representatives of organizations whose members depend on safe and secure ocean shipping routes, we urgently call on countries to join, support, or align with the mission to support safe and secure maritime commerce in the Red Sea,” the groups said in the Feb. 8 letter.
- The letter cited route changes that have caused port congestion, equipment shortages and soaring shipping rates. Signatories to the letter included American Apparel & Footwear Association, the U.S. Fashion Industry Association, the National Retail Federation and the American Association of Port Authorities, among dozens of others.
Dive Insight:
The shipping slowdown in the Red Sea following attacks on vessels by Houthi rebels have had an uneven impact among and within industries.
The letter from AAFA, NRF, USFIA and others amounts to a plea for international intervention to secure trade in the region for those businesses that are affected. They pointed specifically to Operation Prosperity Guardian, a multi-nation commitment to defending shipping in the region.
“Maritime safety and security are vital for our collective industries, and the overall global economy,” the groups said. “It is imperative that governments unite behind a zero-tolerance approach to deter attacks on commercial vessels and seafarers in the Red Sea, and anywhere in the world.”
They pointed to 30% of the world trade that moves through the Red Sea and “upwards of $80 billion” in cargo that has been diverted to date around the Cape of Good Hope to avoid the shipping snarls and danger in the Red Sea.
After years of supply chain disruptions during the pandemic era, retail and fashion as industries have some practice in navigating turmoil.
“Just when we thought we were getting out of the wood of supply chain issues, we have this,” Harmit Singh, chief financial and growth officer of Levi Strauss & Co., said of the Red Sea turmoil on an earnings call in late January. “But we have experience in resolving some of these things. We've activated our contingency plans.”
Singh noted at the time that the apparel brand had seen a 10-to-14 day increase in transit times. “It's not going to break the bank,” he said. “We're working through it as we speak.”
But many in retail and apparel, at least in mid-January, seemed relatively unfazed. “Broadly, most management teams seemed to feel that the Red Sea disruption was friction at best and would not have the same impact on operations and inventories as COVID-related disruptions in 2021 and 2022,” Telsey Advisory Group analysts said in a January note based on conversations with industry executives at the ICR Conference.
Among hardline retailers, those with a heavier global sourcing reliance — including Wayfair, RH, Beyond Inc. (formerly Overstock) and Best Buy — could be more affected by Red Sea disruption than those that source closer to home, analysts with Jefferies noted in January.
