West Coast crisis over, U.S. retail trade groups look East

Reuters News
Posted: Dec 05, 2012 5:04 PM

By Nivedita Bhattacharjee

(Reuters) - With West Coast port workers back on the job Wednesday, U.S. retailers and trade groups were turning focus back to negotiations to stop a potentially more damaging port strike in the East.

Retailers ranging from Target and American Eagle to Home Depot told Reuters they have their holiday merchandise in place and the eight-day long strike at the ports of Los Angeles and Long Beach would not upset plans.

However, a second, wide-reaching strike on the U.S. East and Gulf coasts could change that for the upcoming spring/summer season, for which merchandise will start to ship soon.

"Potentially, the strike on the East Coast is going to be a much bigger strike. This potential strike (would span) Maine to Texas, so the effects could be bigger," said Jonathan Gold, vice president of supply chain and customs policy for the National Retail Federation.

The collective bargaining agreement between the International Longshoremen's Association (ILA) and the U.S. Maritime Alliance (USMX) was originally set to expire on September 30. That agreement was extended to December 29, averting a potential strike that would stop deliveries to ports along the U.S. Atlantic and Gulf coasts during the holiday retail season.

The ILA and USMX were not immediately available for comment.

About 20,000 longshoremen who handle container cargo from Maine to Texas are represented by the ILA. USMX is an alliance of container carriers, direct employers and port associations along the U.S. East and Gulf coasts.

Trade groups like the National Retail Federation, American Apparel and Footwear Association and the Retail Industry Leaders Association are all following the developments closely.

Though they would not comment on the likelihood of a strike, all of them said there could be serious impact on the broader U.S. economy if the East and Gulf ports stopped working.

"Any port work stoppage impedes four million U.S. workers from being competitive in the global market," said American Apparel and Footwear Association's chief Kevin Burke.

"We should now focus our attention on ensuring the stakeholders on the East Coast are negotiating in earnest to prevent a strike from ever happening along the East Coast," he said.


The eight-day strike at the ports of Los Angeles and Long Beach, which sapped the region's economy of an estimated $8 billion, ended on Wednesday.

This has already affected supply chain systems to some extent, putting additional pressure on retailers to maintain a glitch-free system.

On December 2, Gap Inc's Chief Executive Glenn Murphy warned in a letter to U.S. senator Dianne Feinstein that, given the holiday season, the company will not be able to maintain its seasonal employees and would cut hours at Gap's California distribution center if the strike carried on for long.

"Each day of down time will result in up to 3 days required for recovery to get our cargo to our retail shelves and a cost of nearly $6 million a day in lost revenue potential," Murphy said in the letter.

Trade experts say that although the dangers might not be great, there will be some potential impact in the near future.

"This week, retailers were really looking hard at their early January advertisements to make sure that the stuff that was advertised for sales during that period was going to be available in the stores," said Brian Dodge, spokesman for the Retail Industry Leaders Association.

Others, like the NRF's Gold, pointed out that a shipping delay of this kind comes with additional costs that the market had not anticipated.

"(There will be) costs from the carriers, for repositioning (merchandise), potential markdowns if merchandise isn't there on time, fees from ports, other transportation costs. These are things that are just starting to hit," he said.

Foster Finley, managing director and head of transportation logistics at AlixPartners, said small- or medium-sized retailers that use smaller shippers would have more difficulty getting goods to shelves.

"As always, there will be some winners and losers as they report on their holiday sales. The difference is, whether (the strike) will be legitimately something that has impacted them or it becomes a convenient crutch for them to point to when they're trying to explain why they may have fallen short of expectations," Finley said.

(Reporting by Nivedita Bhattacharjee in Chicago; Editing by Nick Zieminski)