Peak season is here, and ShipHero is here to help you through it! Our ShipHEROs at the warehouses are moving at light speed to keep up with demand. We wanted to check in and give you an update on some early trends that we’ve spotted.
Peak Season is Full of Surprises
Due to the fact that the ocean container peak season is from July through September, we can gauge the way other transportation peaks will function during the remainder of the holiday season. Because of this estimation, FreightWaves says, with certainty, that the rest of the season will be incredibly weak. The effects of the Coronavirus have been far-reaching, and peak season is no exception. We’ve seen a significant decrease in demand for all modes of transportation. As a result, peak season shipments are expected to be down significantly this year.
Shipping Rates are Declining
There’s a little something extra in the air… deflation! That’s right, prices are falling during the shipping peak season in 2022. Rates dropped early this year, but in May, they began falling dramatically – presumably because of lowered demand due to inflation and the Shanghai lockdown limiting the availability of goods.
- According to Freight Os, In late July, Asia-US West Coast rates were 55% lower than at the start of the year and 64% lower than at the same time in 2021.
- Asia-US East Coast rates also fell 38% between January and July, reaching costs 50% lower than last year’s.
- Rates from Europe to the US fell about 25% between January and May.
The dramatic drop of May-June has slowed, moving into a leveling-off, but we have yet to see the spike we normally see this time of year.
One factor that has contributed to this trend is falling demand. Retailers report that shoppers are simply buying less than they have in previous years. Another factor is advance orders. Many retailers have already filled their holiday inventory based on advance orders from suppliers, so they may not need to order as much during the peak season.
However, this trend doesn’t apply close to home. National and regional U.S. carriers have still instituted carrier and gas surcharges to keep up with the extra domestic demand they see during peak.
Carrier Updates: Demand Declines, but Congestion Persists
It’s the peak season for shipping, but carriers struggle to keep up with the demand. Rather than the traditional busy peak season, this year has been marked by falling demand and congestion. Excess inventory has meant more congestion than ever, at least in the short term: since new inventory has been arriving before old inventory has emptied, warehouse space is tight.
Containers continue clogging up ports as they wait for a place to go. Retailers have all of the products they need in their distribution networks for the holidays (and then some), so there won’t be a lot of freight demand as we head into the last month of the year. As a result, carriers struggle to keep up with the seasonal shipping trends.
The current situation for freight carriers can be best summed up with one word: peaky. While peak season is typically a time of high demand and increased congestion, this year has been anything but typical. Retailers were carrying bloated inventories and focused on burning them down, which meant fewer load opportunities for carriers. And with firms getting more nervous about the broader economy heading into 2023, there is little incentive to replenish inventories. This could mean more disruptions to seasonal shipping trends and carrier updates in the coming months.
Spot Rates have Fallen, but Contract Rates are High
Contract rates may not be falling as quickly as spot rates, but that doesn’t mean businesses are ready to give up their contracts. Many companies are splitting their shipments, using spot rates for some goods while retaining contracts for others. This strategy allows businesses to take advantage of lower rates without sacrificing the stability of a long-term contract.
While ocean spot rates and imports have declined sharply this year, contract rates have remained relatively steady. This makes sense when you consider that peak season typically begins in the year’s second half. So even though spot rates are lower than they were a few months ago, businesses are still willing to pay a premium for the predictability of a long-term contract.
The Chinese Zero-Covid Policy Uncertainty
The ongoing Covid-19 pandemic has wreaked havoc on the global economy, and the peak shopping season is about to get even more chaotic. According to reports, China is considering lifting its zero-Covid policy to keep peak season on track. However, this could lead to even more disruption as merchants worldwide scramble to get their orders in. If the restrictions are lifted, manufacturers could be overwhelmed by the sudden surge in demand, leading to product shortages and delays. However, if things stay as they are, sellers could be left dealing with serious shortages during high demand.
Tips for Avoid Issues During Peak Season 2022
1. The only thing you can be certain of is that things will keep changing and developing. There are many moving parts, and things can change quickly, so it’s important to stay as informed as possible. This might mean choosing an industry-informed blog to check every couple of days or getting push alerts about the situation sent to your phone. It’s hard to account for changes and developments you don’t know are happening.
2. While the holiday rush can be a boom for sales, it can also be stressful if you’re not prepared. Fortunately, demand forecasting can help take some guesswork out of holiday planning. By looking at historical sales data, retailers can get a good idea of how much customer demand there will be for their products or services during the holidays. Demand forecasting can then use this information to plan inventory and production levels so that businesses can meet customer demand during the peak season.
3. As peak season marches on, many retailers feel the pressure. Will they have enough inventory to meet customer demand? Will their suppliers be able to keep up with orders? These are valid concerns, but sourcing products from local manufacturers is one way to help shield yourself from supply chain shocks.
Of course, no manufacturer is immune from issues, but if you’re sourcing products from within your own country, you’re more likely to be shielded from international disruptions. And if your manufacturer runs into difficulties, only a small portion of your intended selling range will likely be affected. So, explore local manufacturing options for your peak season needs – it’s good for the environment and can help you avoid potential disasters down the road.
We’re All in This Together
It’s been a long, hard road for everyone in the manufacturing, shipping, and e-commerce industries since the Covid-19 pandemic hit. And unfortunately, there’s still no end in sight. Every year brings new challenges and uncertainties, making it difficult to predict whether things will get better or worse. However, there is one thing sellers and freighters can do to help ensure they’re operating on the best possible information: stay up to date on the latest industry news. This way, they can be ready for whatever peak season throws their way. With determination and a commitment to keeping informed, sellers and freighters can weather any storm. After all, we’ve been through a lot these past few years. But together, we’ll make it through to the other side.
Peak season is here, and ShipHero wants to help you get through it with only a few scratches! We have everything you need to ensure it goes smoothly. With important updates, notifications, and general advice, you can be sure that you’re rocking peak season in 2022.
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Aaron Rubin, Founder & CEO
About the author: Aaron Rubin is the Founder & CEO of ShipHero. He is responsible for planning and executing the overall vision and strategy of the organization. Rubin’s greatest strengths are leadership, change management, strategic planning, and a passion for progression. He is known for having his finger on the pulse of ShipHero’s significant initiatives, entrepreneurial spirit, and keen business acumen. His leadership of ShipHero is grounded in providing excellent customer service that drives improved business operations. His passion for ShipHero comes from the culture and his ability to impact the lives of employees, customers, partners, and investors.