The Freight Crisis

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The Red Sea, a critical passageway for 30% of the world's container traffic, is currently facing a shipping crisis of unprecedented magnitude.

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The recent conflict in the Middle East has led to several attacks on commercial vessels. The group most associated with these attacks is Yemen’s Houthi militant group. This string of attacks has forced ships to take longer, more expensive routes to transport goods.

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According to freight market tracker Xeneta, the average cost to move a 40-foot container between Asia and northern Europe increased to $6,855 in late June, up 110% from the two months prior and nearly five times the price from a year ago.

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Which brands could be impacted: Wayfair, Best Buy, Beyond Inc. (formerly Overstock), and RH (formerly Restoration Hardware) could be the most at risk from the prolonged crisis because of their “elevated global sourcing exposure.” Meanwhile, brands like Home Depot and Lowe’s are less at risk due to their domestic and close-to-home sourcing strategies.

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With no end to the conflict in sight, it’ll be interesting to see how companies will get creative with their supply chains in order to maintain their pricing for consumers and their own margins.