Retailers Rush to Avoid Delays to Spring Collections Due to Red Sea Attacks

People use sled on a frozen lake in Beijing on January 10, 2024. (Photo by WANG Zhao / AFP)
People use sled on a frozen lake in Beijing on January 10, 2024. (Photo by WANG Zhao / AFP)
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Retailers Rush to Avoid Delays to Spring Collections Due to Red Sea Attacks

People use sled on a frozen lake in Beijing on January 10, 2024. (Photo by WANG Zhao / AFP)
People use sled on a frozen lake in Beijing on January 10, 2024. (Photo by WANG Zhao / AFP)

Retailers worldwide are stocking up on goods before China's Lunar New Year holiday and seeking air or rail alternatives to transportation via the Red Sea in a scramble to avoid empty shelves this spring, executives and experts told Reuters.
One European retailer said it was delaying marketing campaigns for some specific goods until stocks were secured. Major container ship operators like Maersk and Hapag-Lloyd are re-routing vessels away from the Suez Canal - the shortest route from Asia to Europe - after militant attacks on vessels in the Red Sea.
The diversions have raised fears of another prolonged disruption to global trade just as supply chains unsnarl after the COVID pandemic. Going around southern Africa instead adds $1 million in fuel costs and about 10 days to the journey.
Interviews with five retailers selling everything from furniture to mechanical components, and with analysts, show the unusual steps companies are taking to adapt.
US-based BDI Furniture is front-loading orders and relying more on factories in Türkiye and Vietnam. It is also asking freight brokers to bypass the Panama and Suez canals and ship goods across the Pacific Ocean to California, where they can be transported by rail to its east coast US warehouse.
Hanna Hajjar, vice president of operations at BDI Furniture said it has low stocks of some media cabinets, bedroom and office furniture that are already on ships.
"We just did not expect all these recent delays," he said, adding that the disruptions have lengthened transit times from Vietnam by 10-15 days.
Companies transporting goods from China to Europe and the United States are considering alternatives like rail and air, but high prices mean they have to be strategic about which products to prioritize.
Hajjar says BDI is using the California route as a solution on a case-by-case basis because rates are now double the normal cost of shipping through Suez or Panama.
Even though Asia-to-Europe trade is most exposed to the Suez disruptions, as much as 30% of shipments to the US East Coast move via the canal.
RACE AGAINST TIME
Retailers are also in a race against time: on Feb. 10 factories in China close for anywhere from two weeks to a month for the Lunar New Year holiday, so companies typically try to export as much as possible beforehand.
But with vessels rerouted, fewer ships will be back in China in time to load cargo before the holiday. That means likely delays to products meant to land on Western shelves in April or May. Logistics experts are already reporting a container shortage at Ningbo port in China.
"The worst thing to happen to a retailer is having a significant delay on a product that they won't be able to market because of seasonality," said Rob Shaw, general manager for EMEA at inventory software company Fluent Commerce.
Europe's Aldi Nord said it may receive items like household goods, toys and decorations later than planned, and is postponing the advertising of specific products as a result. Britain's Next said the delays were manageable compared to those during the pandemic. But the retailer, which sources most of its products from Asia, could mitigate this through earlier ordering and using more air freight.
"The lessons (from COVID) are on stock being delayed - order a little bit earlier and allow for a little bit more air freight," CEO Simon Wolfson told Reuters.
One option is a rail route from western China to eastern Europe.
Craig Poole, UK managing director of Cardinal Global Logistics, said the cost of using it has jumped to around $9,000-$10,500 per 40-foot container from around $7,000 in November, and is increasing daily.
IC Trade, which exports mechanical components from China to Italy, is exploring the rail option but "it's not easy to find the space," said founder Marco Castelli. "To make up for one vessel, you need 100 trains."
Polish fashion retailer LPP said it is considering rail or sea-air alternatives for its "most urgent" collections.
RBC analysts said continued disruptions could hurt European retailers' gross profit margins, while the prospect that fresh supply chain strains will push up prices has raised fears of another bout of global inflation.
For some companies, the latest disruptions highlight the need to permanently shift supply chains so factories are closer to the end consumer, a process often called "near-shoring".
BDI Furniture aims to cut its dependence on China to 40% of total orders over the next two to three years from 60% currently, by sourcing more from Vietnam and Türkiye.



Shein Gains UK Approval for London IPO, Awaits China Nod

FILE PHOTO: A company logo for fashion brand Shein is seen on a pile of gift bags on its Christmas bus as part of a nationwide promotional tour in Liverpool, Britain, December 14, 2024. REUTERS/Phil Noble/File Photo
FILE PHOTO: A company logo for fashion brand Shein is seen on a pile of gift bags on its Christmas bus as part of a nationwide promotional tour in Liverpool, Britain, December 14, 2024. REUTERS/Phil Noble/File Photo
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Shein Gains UK Approval for London IPO, Awaits China Nod

FILE PHOTO: A company logo for fashion brand Shein is seen on a pile of gift bags on its Christmas bus as part of a nationwide promotional tour in Liverpool, Britain, December 14, 2024. REUTERS/Phil Noble/File Photo
FILE PHOTO: A company logo for fashion brand Shein is seen on a pile of gift bags on its Christmas bus as part of a nationwide promotional tour in Liverpool, Britain, December 14, 2024. REUTERS/Phil Noble/File Photo

Online fast-fashion retailer Shein has secured approval from Britain's Financial Conduct Authority (FCA) for its planned initial public offering in London, according to two sources with knowledge of the matter.

The FCA's approval marks a significant step forward in the China-founded company's pursuit of a London listing after it confidentially filed papers with the British regulator last June.

But it will also have to contend with market turmoil caused by US President Donald Trump's 145% tariffs on Chinese goods and tighter rules on duty-free shipments from China to the US.

Shein, which sells $10 dresses and $12 jeans in more than 150 countries and was valued at $66 billion in its last fundraising round in 2023, will also need to secure approvals from Chinese regulators, notably the China Securities Regulatory Commission (CSRC), for the London float, sources have said.

The company in recent weeks informed the CSRC of the FCA's approval but has yet to receive a green light from the regulator, said one of the sources. They declined to be named as the information remains private.

Shein and the FCA declined to comment, while the CSRC did not respond to a request for comment.

Shein, whose clothes are produced at thousands of factories mostly in China, last year sought Beijing's approval to go public in London, despite the company having moved its headquarters from Nanjing, China, to Singapore in 2022.

Shein's filing with the CSRC makes it subject to Beijing's new listing rules for Chinese firms going public offshore, sources have said.

Shein does not own or operate any manufacturing facilities and instead sources its products from around 5,800 third-party contract manufacturers mainly in China, subjecting it to the CSRC's listing rules, a separate source said previously.

The rules are applied on "a substance over form" basis, giving the CSRC discretion on when and how to implement them, the source added.

Shein ships the majority of its products directly to shoppers by air in individually addressed packages.

Under the CSRC's rules, a host of authorities such as the National Development and Reform Commission, which supervises foreign holdings in local firms, the cybersecurity regulator and others may get involved in approving offshore IPO applications.

'DE MINIMIS' ISSUES

Shein, founded by China-born entrepreneur Sky Xu, initially aimed to go public in London in the first half of this year, contingent on securing approvals from regulators in both the UK and China, Reuters reported in January.

But its prospects have come under a cloud in recent months as the Trump administration moved to end the "de minimis" duty exemption, which allows shipments worth less than $800 duty-free entry to the US and has helped Shein keep prices low.

Trump last week signed an executive order ending de minimis for shipments from China and Hong Kong effective on May 2.

The measure's removal could force it to hike prices in the US, its biggest market, though the change has been widely expected and Shein has sought to adapt by adding suppliers in Brazil and Türkiye.

The development, along with market turmoil caused by Trump's tariffs on China, could also delay the fast-fashion group's original IPO schedule to the second half of the year, said the sources.

In February, Reuters reported that Shein was set to cut its valuation in a potential listing to around $50 billion, nearly a quarter less than the $66 billion valuation it achieved in a $2 billion private fundraising in 2023.

Shein's eventual IPO valuation will hinge on the impact of the de minimis termination on its business, sources have said. The amount to be raised in the IPO remains unclear.

Trump's trade war with China has more broadly triggered fears of resurgent inflation and weaker consumer spending in the US, muddying the outlook for retailers including Shein and its Chinese discount goods rival Temu.

The stock market volatility of the past week also makes pricing an IPO very challenging, and has caused companies like Swedish fintech Klarna to pause their listing plans.

Shein last year shifted its focus to a London listing, ending an attempt at a US IPO after pushback from US lawmakers concerned about alleged labor practices in its supply chain in China.

Shein has said it has a zero-tolerance policy for forced labor and child labor in its supply chain.