In the coming weeks, shipping lines, railroads, cargo owners, trucking, labour, equipment owners and others associated with seaports in North America will begin considering what to expect with Peak Season 2015.

The job is not easy, particularly for the US West Coast, which recently experienced a massive port slowdown. The Ports of Los Angeles and Long Beach especially want to show they are up to the task of handling large volumes.

“We will be drilling down on this year’s peak demands and build upon what we already have here and what we can do in the short term,” says Phillip Sanfield, Port of Los Angeles spokesman.

With peak season just around the corner, shipments of apparel and footwear will encompass significant portions of that demand.

Nate Herman, vice president of international trade for the American Apparel & Footwear Association (AAFA), tells Asia Cargo News that early indications for peak season are positive.

“US import numbers for apparel and footwear are up for the first four months of year, and people are expecting a good holiday,” he says. The reason: The US is experiencing a better economy and people are feeling better.

“Our economy has been doing better for a while, and people are now feeling better about it,” Herman says.

Supplier/Retailer Outlook

Retailers already are placing their orders and making plans to stock their stores with the highly competitive, seasonal, and quick moving merchandise.

While it’s difficult to say what the big sellers and the quantities will be, recent results offer a few hints. Mark Parker, president and CEO of Nike reported in the company’s 2015 third quarter results that “our growth strategies are working, even under challenging macroeconomic conditions. Our relentless commitment to innovation and our powerful portfolio allows us to invest in the opportunities with the highest potential for growth as well as manage risk.”

Nike’s 2015 third quarter report states that as of the end of the quarter, worldwide futures orders for Nike brand athletic footwear and apparel scheduled for delivery from March 2015 through July 2015 were 2% higher than orders reported for the same period last year. Excluding currency changes, reported orders would have increased 11%.

Business Wire reported Ralph Lauren, chairman and CEO, revealing on May 13 that his company’s fourth quarter report made excellent progress on its strategic initiatives. “We opened several stores in key markets around the world, fueled the momentum of our luxury accessories business with the launch of the Drawstring Ricky bag, and continued to innovate with the introduction of Polo for women as well as the development of Polo Sport, which will be launching this fall,” he said. “We also announced a new global brand management organizational structure that will more fully leverage the power of our brands to drive future growth for the company.”

In the first quarter of fiscal 2016, the company, however, expects consolidated net revenues to be flat in constant currency, as retail segment growth is offset by a decline in wholesale revenue which is impacted by its customers’ receipt plans due to an earlier Easter next year.

Marc Heller, Northeast regional manager and international manager of CIT Commercial Services, predicts that luxury products will continue to be strong for a long time. “Luxury goods in China are probably one of the best businesses today,” he says.

Business at low end department stores is predicted to become soft. Heller sees the specialty stores suffering the most for sales.

“Fall, and the holiday season, are a barometer of consumer confidence and what consumers are buying,” he says. “Back-to-school and fall are important as this is the busiest time for retailers.”

Business Alterations

Retailers have been changing their approach to purchasing apparel and footwear. For example, if retailers find that business is soft – overall or in specific product categories – they will delay or cancel orders.

“A lot of retailers have changed their replenishment schemes,” Heller adds. “This puts the burden back on the vendor to hold product for when the retailer needs it.”

Vendors have become very astute in managing retailers so to not carry too much inventory. Consequently, suppliers have become more conservative and today manager their inventories better.

Supply chain management has become even more critical, particularly with retailers such as Zara, H&M, and Forever 21 which replenish their stores daily to continuously offer shoppers something new to buy.

“We have new garments coming into the stores almost every day,” says Karl-Johan Persson, CEO of H&M. “If you go in an H&M store and come back two days later, you will find something new.” The practice has resulted in fashion going from designer sketch books to the rack in as little as three weeks.

In January, Swedish fashion retailer Hennes & Mauritz said its earnings rose by 12% in fourth quarter 2014, boosted by expansion in the United States and China.

Last year, H&M opened 379 stores and plans to open about 400 more this year -- mostly in the US and China, but also in new markets including India, South Africa, Peru, Taiwan and Macau. Today, the retailer has more than 3,500 stores worldwide.

It’s also expanding its internet sales. Last year, H&M opened its online store to customers in France, Italy, Spain and China.

Retailers have found that fast fashion to be massively profitable. Putting even further pressure on the supply chain is faster and cheaper clothing. Fast and cheap clothing is not only a trend within fast fashion retailers. To capture their share of the business, traditional retailers have lower prices as well. Consequently, the only way brand manufacturers have found they can make money is by selling apparel through volume.

US Legislation

Actions by the US Congress in the coming weeks, however, could have the biggest impact on future apparel and footwear imports and exports where the United States is concerned. 

Interest groups such as the AAFA expect Congress to vote on the Trade Promotion Authority (TPA) sometime in June. If passed, the measure would allow President Obama to “fast-track” key trade deals and, therefore, create more predictability for successful conclusions for trade pacts.

“TPA is important because without it, the United States cannot complete the other two agreements: the Trans-Pacific Partnership (TPP) and Trans Atlantic Trade and Investment Partnership (TTIP),” Herman says. “Those agreements have the potential for huge benefits for the footwear and apparel industry,” Herman says.

TTP is particularly critical for Vietnam and Japan. At 12%, Vietnam is currently the biggest supplier of footwear and apparel to the US market.

“That may be a relatively small amount compared to China, but it has been growing at double digits in last couple of years as people look for an alternative to China,” Herman says.

“Japan has pent up demand for US-made and branded footwear and apparel goods, and, therefore, has the potential to become a huge import market for us. Japan is very restrictive on import quotas for footwear. We hope that under TPP, that will be eliminated.”

Equally important is the Trade Preferences Extension Act of 2015, which the US Congress also should take up in June.

“This legislation has a number of pieces that are very important to the footwear and apparel industry,” Herman emphasizes.

Not only would it renew and extend the African Growth and Opportunity Act, which offers trade preferences for African nations; it would renew and extend the Generalized System of Preferences (GSP) program, and expand GSP for to include travel goods for accessories: handbags, luggage, backpacks, and smart phone cases

“This is a fast-growing part of our business,” Herman says.

GSP allows duty free access for imports from most developing countries.

Finally, the act would extend trade preferences to Haiti, which has the potential to become a critical supplier to the US market.

“If Congress renews the act, those extensions would go into effect immediately without waiting for passage of TTP,” Herman says. “This would allow the United States to import an even wider and higher quality of clothes and shoes at lower prices.” The result would increase shipping volumes and impact the steamship lines as well.

Herman projects that the passage of these bills is likely.

By Karen E Thuermer

Correspondent | Washington