The attached article is about American business topics. The book that is being used for this course is: Small Business Management: Launching and Growing Entrepreneurial Ventures, 20th Edition, Cengag

How the port strike could raise prices and hurt small businesses.

Author: Jaclyn Peiser From: The Washington Post Date: Oct. 2, 2024 Publisher: The Washington Post

Byline: Jaclyn Peiser

Most consumers won't notice a meaningful change in prices, inventory or deliveries from their go-to retailers in the first few days of the dockworkers' strike that has idled ports along the East Coast and the Gulf of Mexico.

But that will change quickly if this key link in the global supply chain remains offline for two or more weeks. A prolonged gap would reverberate across the economy, barreling from farmers and manufacturers to retailers and, soon enough, consumers. Prices of certain perishable goods would creep up, inventory thin out and delivery times lag, industry experts said. And it would almost certainly affect the holiday shopping season.

"A one-day shutdown can take on average three to five days to recover from, and if the strike is prolonged, that compounds every day," said Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation. "If we go two weeks, you're looking at several months, and that could take us beyond the holidays."

Negotiations between the 47,000-member International Longshoremen's Association and the U.S. Maritime Alliance, which represents the companies, unraveled in June. The union is seeking significant pay raises and guarantees that its members won't be replaced by automation. Late Monday, the Maritime Alliance countered with an offer of a 50 percent raise over six years.

Although the strike isn't expected to give rise to the type of severe trade disruptions that became a hallmark of the pandemic, it comes at a particularly vulnerable period for retailers: It's peak time for holiday inventory delivery. More than half of imports traveling by sea in containers go through the East and Gulf coast ports, according to data from S&P Global Market Intelligence. Delays in deliveries could erode profit margins - notably for small and medium-size business - and push off sales schedules, industry experts said.

An extended deadlock also could temper projections of a record holiday shopping season boosted by cooling inflation, wage growth and a strong labor market. Analysts project that Americans could spend between $983 billion and $993 billion online and in stores this year.

The longer the strike lasts, the stronger the possibility of higher prices on a range of gift-giving staples that move through these ports, including apparel, toys, games, sports equipment, perfumery and cosmetic goods, which might cause shoppers to pull back.

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Supply crunch

Any price changes will begin with food, said Patrick Penfield, a professor of supply chain practice at Syracuse University. Perishables such as bananas and certain kinds of seafood, cocoa and coffee will be in short supply because they "are brought in on a daily basis," he said.

A supply crunch will initially drive prices up, said Pawan Joshi, executive vice president of products and strategy at the supply chain management platform e2open. Some retailers and suppliers will turn to shipping via airplanes, which is more costly than cargo ships.

"At the end of the day, none of the brands are going to absorb the cost of it - it's going to be passed on to the end consumer," Joshi said.

As for inventory, the impact on businesses won't be one-size-fits-all, Penfield said. Consumers shopping at big-box stores probably won't notice much difference on shelves for a while. Most of those retailers have been preparing for a shutdown for months by placing holiday orders earlier than usual and rerouting some shipments to West Coast ports.

The National Retail Federation's global port tracker showed there was a significant increase in import volume starting in May and continuing through the summer, Gold said.

Costco chief executive Ron Vachris referenced contingency plans in the warehouse club chain's quarterly earnings call last week, noting that it has been monitoring the labor dispute for "some time."

"We've cleared the ports, we've preshipped," he said. "We've done several different things ... to get holiday goods in ahead of this time frame and looked at alternate plans that we could execute with moving goods to different ports and coming across the country if needed."

Ikea has also been prepared for a "couple of months" by "front-loading for the holiday season," said Susanne Waidzunas, the company's head of global supply chain.

By contrast, small and medium-size businesses will bear the brunt, Joshi said, because they can't afford to move up their ordering schedule or expand their warehouse capacity. And many may not have been aware that a dockworker walkout was imminent.

Lisa-Jae Eggart, a co-founder of natural tick repellent company 3 Mom Organics, learned about the impending strike last week and immediately reached out to her suppliers. She learned that her shipments are coming in through the West Coast ports, but she's still concerned that a backlog from companies redirecting their shipments there will cause a delay on her orders of bottles and tops.

Mass diversions could also lead to "a temporary surge in freight costs, potentially eroding profit margins," said Mickey Chadha, a retail analyst and vice president at Moody's.

"This could be potentially terrifying for many small businesses," Eggart said. "This could really blow up the small businesses who have very small margins to begin with ... and ultimately the consumer is going to pay."

The strike would be especially devastating for businesses, such as department and toy stores, that rely heavily on sales leading up to the Christmas season, said Ben Johnston, chief operating officer of Kapitus, which provides financing for small and medium business. These could easily "fall behind some of your larger competitors who may be out ahead if this goes on for a significant period of time."

Danny Reynolds let out a sigh of relief when most of his inventory for the rest of the year arrived last week. But the owner of Stephenson's of Elkhart, a 93-year-old department store in Elkhart, Ind., worries that any shipping disruptions could hold up wedding dress deliveries timed to winter and spring weddings.

"Our primary concern is always the customer," Reynolds said, noting that 90 percent of the wedding merchandise is made in China - and gowns usually take three to six months to arrive. "We're trying to do what we did during covid ... by being proactive and talking to our manufactures."

But Reynolds is worried that the store could get behind on its spring merchandise, which typically arrives at the end of the year. This is entirely possible if the strike lasts weeks, Penfield said, as the backlog of containers to be unloaded could stretch for weeks or months. Even then, bigger retailers will get priority because they have larger orders, while smaller retailers' orders often "get lost," he said.

"There's a domino effect," Joshi said. "We think of this as just a port strike, but it ... has a potential to disrupt a lot of [the global supply chain]."

Works Cited

Peiser, Jaclyn. "How the port strike could raise prices and hurt small businesses." Washington Post, 2 Oct. 2024. Gale Business: Entrepreneurship, link.gale.com/apps/doc/A810942080/SBRC?u=txshracd2491&sid=bookmark-SBRC&xid=a637345b. Accessed 20 Apr. 2025.