Retailers feel the pain
Delivery issues due to virus warning to rethink reliance on giant market: Jones
Retailers face lengthy waits for stock as parcels and shipments pile up in China amid air freight bans, posing the risk of operations coming to a standstill.
This week NZ Post announced it had halted all mail coming in and out of China, due to the suspension of flights by its air freight partner airlines.
While the state-owned enterprise said parcels could still come in from China, it has warned there could be significant delays. Retailers face potential delays in receiving next season’s stock as the ban is at this stage indefinite, though under review.
Regional Economic Development Minister Shane Jones said the impact of coronavirus on New Zealand businesses, particularly smaller operations, would be significant.
He described the situation as “disappointing” and said organisations needed to move to ensure they were not so reliant on China.
“This is going to be disruptive in a whole host of systemic ways for many of our businesses,” Jones told the Herald.
“We need to remind ourselves this is the problem when any economy, or any business, ends up being ordinately reliant on only one destination.”
Over the past 10 years New Zealand businesses have experienced strong trading with China, which has grown to become the country’s largest trading partner, following the implementation of the New Zealand — China Free Trade Agreement in 2008.
But Jones said organisations should be looking to other countries in the Asean region to ease the reliance on business based in China.
“We’ve all enjoyed the trade-based yum char party with China for nine, 10 years, and we’re now being jolted out of a level of complacency, that risks such as a pandemic or other health scares do have these volatile consequences.”
Organisations needed to look at setting up manufacturing hubs and arrangements with suppliers based in other parts of Asia to ease such reliance, he said.
“If [entrepreneurs] want to futureproof their businesses, this is a good opportunity to make those hard but overdue decisions.”
Jones said he had spoken to a host of businesses throughout the logistics supply chain industry, including the CEO of KiwiRail, which had concerns about coronavirus and its knock-on effects disrupting operations.
“Everyone is telling us the same things; the connectivity, whether its ship-bound trade or airborne trade, they are all in smeared in massive backups and disrupted-ness.”
Travel blogger Megan Singleton, owner and operator of e-commerce travel business Travel Store, said her stock coming from China had been delayed because of the vi
rus.
“I’ve got some stock that hasn’t even been pulled and packaged yet, that I ordered about a month ago, and I’ve got some stock that is getting through,” Singleton said, adding that all stock that had come through had been delayed. “I’d say about a third of it is seriously being held up.
“I’d be really interested to know if these packages are being stockpiled at the airport for freight to New
Zealand or if they are being blocked from even leaving the factory. None of my suppliers have told me they can’t get the stock out of the factory due to the airlines.”
High street retailers and some of the country’s largest chains rely heavily on China for goods, this includes Hallenstein Brothers, Glassons, Kathmandu and Farmers. Even for retailers whose product is not manufactured in China, many source their raw materials from the country.
While Kathmandu said it had not expected there to be a supply impact in the short term, it has drawn up contingency plans in case disruption hits its Chinese suppliers.
Briscoe Group had cancelled its buying trips to China following the outbreak.
Singleton said her business had not yet been affected by disruptions but was concerned it could be, given all of her product came from China.
Retail analyst Chris Wilkinson said New Zealand retailers were highly reliant on China for stock and manufacturing, many with offices there dedicated to vendor management.
“As the world comes to terms with this current issue, all major retail chains will be looking to these alternative channels, so it’s not as simple as switching sourcing,” Wilkinson said.
“In the UK . . . we have already seen big factories have to reduce hours, because they can’t get components to manufacture products — so that’s impacting consumer confidence. NZ has a similar issue with our export industries, while tourism sectors are rapidly looking to plan-b audiences like domestic visitors and the Australian market for resilience. So, it could be felt both from a demand and supply basis.”
Retailers holding the majority of their stock in China would be most impacted by the outbreak, which has halted business for many employers in China, he said.