In the nearly 40 years she has spent in trade, Amy Magnus has never seen retailers hoarding so much inventory. Warehouses throughout the United States are at record capacity with Chinese imports of all kinds — microwaves, vacuum cleaner filters, swimwear, furniture — stacked to the ceiling, according to Magnus, who heads the National Customs Brokers & Forwarders Association of America, whose members work with over 250,000 importers and exporters.
“My office is right on a land border and I can see the trucks just coming across non-stop from my window,” Magnus said, referring to her birds-eye view from Champlain, New York, of trade on the border between Canada and the United States.
“Even with Christmas, it’s been notably busier this week and last week than it’s ever been before.”
She is one of over a dozen customs brokers, retailers, vendors, analysts and supply chain experts who said that retailers have been stockpiling inventory from China to avoid higher tariffs that may kick in next year.
The buying binge is also evident in recent data from the National Retail Federation (NRF) and Hackett Associates, which show imports at major US retail container ports surged 13.6 per cent to a record 2.04 million containers in October. This helped push the US trade deficit with China to a record high.
Stores including Walmart Inc, Target Corp, TJX Companies Inc and Macy’s Inc raced to buy Chinese products in September, the sources said, the same month the Trump Administration announced 25 per cent tariffs would go into effect on January 1 on $200 billion of Chinese imports.
The US and China have since agreed to a 90-day trade war truce until March 2, but supply chain firms and vendors said this has not slowed buying or forward orders because the tariffs could still be hiked.
“We have been tactical and pulled some orders forward,” Walmart spokeswoman Marilee McInnis said. The other major retailers, including Target, TJX and Macy’s would not comment for this story on the part tariffs played in their approach to buying inventory this year.
The strategy could mean heavy discounts for shoppers next year if retailers are stuck with an overhang of unsold merchandise. Already, it has driven up transportation and warehousing costs, which is adding pressure to quarterly results for retailers, according to the sources.
The question is whether stores absorb the added costs or pass them on to customers.
“More likely than not, the retailer will take them so the consumer doesn’t have to,” Jonathan Gold, the NRF’s head of Supply Chain and Customs Policy. Gold said he “definitely” expected higher inventory and logistics costs to continue into the first quarter as retailers rush to meet the March 2 deadline. The NRF works with about 18,000 member retailers.
“A lot of people are competing for space right now so you’re going to have some retailers hurt as a result.”
The surplus signals a stark change from last year, when retailers and department stores were ordering less product and in smaller batches to keep inventory costs down. Retailers have for years been struggling with declining holiday foot traffic, and larger inventories weigh on balance sheets.
“It’s very rare that retailers would commit to more inventory in advance,” said Neil Saunders, managing director of consultancy GlobalData Retail. “If they don’t manage to sell their holiday inventory, we’ll see a real glut of it, and some discounting, in the new year.”
Storage is “full to bursting” as a result of retailers’ holiday inventory, plus the additional stocks retailers have been buying for 2019, Saunders said, and retailers are paying more for storage due to a shortage of warehousing across the country.
“Our warehouse is packed with stuff,” said Mike Abt, co-president of Chicago-based appliance and furniture store Abt Electronics. “Air-conditioners are just piled up in random places where they shouldn’t be because we’re running out of room. And we did that in anticipation of 15 per cent more price increases.” — Reuters
Richa Naidu, Lisa Baertlein
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