Asian shoppers unwrap Singles' Day spoils leaving US consumers to bear brunt of supply chain woes

November 11 has increasingly been a big day in Asia. Consumers, hit by a marketing blitz weeks before Singles' Day, plan their purchases and put items into virtual shopping carts early so they can pay for them the instant the clock strikes midnight.

In Thailand this year, a record US$30.5 million was spent in the first two days on e-commerce site Lazada, with most shoppers buying fast fashion from China, while the same site raked in sales of S$11 million (US$8.1 million) in just nine minutes in Singapore, including one shopper who bought 191 items.

It would seem retailers in Asia should struggle to fulfil these overwhelming orders, given tales of pandemic supply chain woes in the United States and Europe. But unlike shoppers in the West, those in Asia have within the week already received or would very soon receive most of their items.

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In fact, Lazada said it processed one-fifth of the parcels "at least 24 hours faster than last year". The customer who bought 191 items has received 98 per cent of them, with just three items still on their way as of Wednesday.

In comparison, the supply chain in the US has snagged throughout the line, from delays in manufacturing hubs and exports, to congested ports within the US and disruptions to land logistics, where there aren't enough truckers to unload and ship goods.

A New York Times report on Catch Co, a Chicago fishing company that produces a calendar counting down to Christmas, said the company would be snared by supply-chain delays that meant the calendar would take 130 days to arrive from a Chinese factory, compared with the typical 60 days. Catch Co estimated the calendar would only get to Walmart stores sometime this week at the earliest, even though they started making the calendars as early as April.

Rahul Kapoor, vice-president of maritime and trade at IHS Global Insight, said he wouldn't claim that Asia was entirely OK, "but we're slightly better off".

Experts like Kapoor pegged it to these reasons: many ports in Asia operate around the clock, so cargo moves faster than in the West, while shoppers in Southeast Asia are also located much closer to the manufacturing hubs of China and Vietnam, compared to those in Europe and the US.

Asian retailers also prepare for big shopping events well in advance. Lazada said preparations begin two months before 11.11 at its fulfilment centres, warehouses and sorting facilities and it also trained staff and ramped up operations and manpower.

Kelvin Lim, founder of Pacific Logistics Group, a logistics provider working in freight forwarding and warehousing in 11 countries, said his company worked with clients on planning and production schedules to pre-empt any potential bottlenecks and delays.

"E-commerce and logistics players have prepared themselves months in advance this year in anticipation of the increased demand," he said.

Still, Asia was not without pandemic supply chain issues. "There might be delays, depending on how strong the demand is, but like I said, it's not the same expectation for delays that you'd expect in the US," Kapoor said.

Varank Subanarat, 49, a brand consultant in Bangkok, likes to buy items from overseas. Her shopping list usually includes vitamins that are cheaper in bulk, and second-hand items or the latest fashion from Europe.

Also in Bangkok, law professor Thunradee Lertchalolarn, 33, often visits Chinese sites like Taobao, Pinduoduo and Alibaba rather than buying items locally. "There are more options to choose from and the prices there are usually better than here," she said.

The downside of buying items from abroad during a pandemic is that shoppers sometimes wait for about a month for their items to arrive.

For consumers like Thunradee, delays arise for a number of reasons. Manufacturers in China now face a power crunch that Lim said has "an enormous impact" on production rates and also affects Chinese ports, impacting exports that are already hit by the limited availability of vessel space and irregular shipping schedules. Beijing's Covid-zero policy also shuts factories when there are outbreaks.

Meanwhile, as economies pick up, the heightened demand for goods is causing container shortages across the globe. When items are finally ready for export, some firms cannot find a spot on containers.

Yukki Nugrahawan Hanafi, chairman at Indonesian Logistic and Forwarders Association, said the large freight ships that used to cater domestically to Indonesian exporters had been routed overseas instead, sending shipping costs soaring.

Indonesian exporters now face shipping costs seven to 10 times the usual price, said Yukki, who fears the container shortage will last until the middle of next year.

Chaichan Chareonsuk, chairman of the Thai National Shippers' Council, is seeing the same in Thailand. He told This Week in Asia: "In the past, logistics accounted only for 10 per cent of total costs. Today, it has gone up to around 20 to 30 per cent."

Then when goods finally arrive at destination ports, some in Asia are congested. Lim said Singapore's port was now taking about a week to clear containers, compared to the two days it took pre-pandemic.

And just as the US has a shortage of truck drivers to unload cargo and move them to warehouses, Singapore too has labour issues due to travel restrictions. Lim said it was hard to recruit the manpower needed for faster port clearance.

In Indonesia and Thailand, strikes by drivers to protest surging diesel prices have caused problems for the land logistics sector.

Indonesia has been experiencing a diesel shortage that is leading to long queues at gas stations in Sumatra, Kalimantan, and Java islands.

Yukki said the queue sometimes went on for two days, eating into the truckers' normal work schedules of 22 to 24 days a month. Earlier in November, truckers in South Kalimantan took to the streets to protest against the diesel shortages, causing a shipping backlog at the province's port of Trisakti.

Thailand's strike has been larger. Since the start of November, more than 100,000 truckers have stopped working. Just last week, hundreds of lorries descended on Bangkok as part of a nationwide "Truck Power" rally to petition the ministry of energy to cap the diesel price, now at 30 baht a litre (US$0.92), to 25 baht per litre.

Apichart Prairungruang, President of the Land Transport Federation of Thailand, told reporters at the demonstration that it was "just a teaser".

"We have 1.4 million trucks across the country," he warned.

There have been efforts by some companies to address the issues. Retail firms are planning for their needs months in advance, and manufacturers are also rethinking their strategies.

Some brands are relocating manufacturing lines out of Asia and closer to their points of sale, but Kapoor said such "nearshoring" happened at the margins, and that China and Asia were still very much the factories of the world.

What has changed is the way manufacturers plan their schedules. Lim said they had been rethinking their "just-in-time" inventory management strategies that they used to minimise inventory costs while maximising output.

Lim's company has been leaning on industry partners to secure shipments for clients, so cargo could be loaded quickly onto vessels to minimise any delays, he said. It is also encouraging customers to use a mix of shipping solutions, mixing sea, air and rail options.

In Indonesia, the Indonesian Food and Beverage Association estimated that supply chain disruptions would contribute to a five to seven per cent price hike for food and drinks. The Indonesian Logistic and Forwarders Association has been introducing manufacturers to shipping-line providers and working together with the Trade Ministry to find a solution for container shortages.

Still, Kapoor said the issues had shown that global supply chains were "very much intertwined". What used to work in a seamless manner was now seeing "several" breakages over the last 12 to 18 months, he said.

The good news is that Kapoor is expecting strains on the supply chain to ease next year, as countries open up further and relax Covid-19 restrictions so people can spend on services instead of consumer goods.

Kapoor said one indication was the sales data for home exercise bike Peloton.

"Those have started coming down, whereas gym memberships and services have started picking up as economies open," he said. "The pressure on the demand side has to come off for supply chains to normalise."

This article originally appeared on the South China Morning Post (SCMP).

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