Aussie stores warn of more product shortages
Shoppers who have already been hit by local shortages in toilet paper, hand sanitiser and pantry staples because of panic buying are being warned to expect delays and shortfalls in a broader range of product categories arising from production slowdowns in China.
Myer CEO John King has warned the company is expecting just 40 per cent of its usual volume of cargo containers in March because of the ongoing effect of coronavirus.
Australia imports an incredibly broad range of products from China, including technology, toys, sporting goods, clothing, furniture, automotive components, industrial machinery, vaping equipment, pharmaceuticals and fruit packaging.
A spokesman for Coles told News Corp that shortages were forecast for stationery, clothing, and electrical goods because of supply chain issues.
Apple has also warned of worldwide delays in deliveries of new products including iPhones, with technology expert Stephen Fenech telling Sky that a lens company Apple relies upon "only has a month of inventory left and will not be able to replenish until May".
Apple's China-related supply problems will benefit Samsung, which is manufactured in South Korea, Mr Fenech said.
A spokesman for fashion site The Iconic told News Corp that "the spread of the coronavirus could pose an industry-wide challenge" but so far they had only experienced "limited disruption to delayed shipments from a few suppliers".
"We believe our broad range and marketplace model, where we offer a vast selection to our customers, is an important mitigating factor for us," the spokeswoman said.
A spokesman for David Jones stressed there were no product delays at the moment, but they were expected.
"We don't have any immediate stock impacts and are working closely with our suppliers as factories continue to come back on line in China. This is an evolving situation and we expect and are planning for some supply chain disruption over the coming months," the spokesman said. "We are working with all our partners across a wide range of markets to minimise these impacts for customers."
A number of retailers appeared reluctant to answer questions about product delays. Representatives from online retailer Kogan declined to comment, while Bunnings, Rebel Sport and Supercheap Auto failed to respond despite multiple requests.
But in a phone hook-up with investors to discuss the company's six-monthly financial results, Myer CEO John King was asked directly about the issue.
"We're probably going to get about 40 per cent of our normal traffic containers through March, with catch-up in April and May, so there's going to be about a four to six week delay," Mr King said.
Some 85 per cent of factories and 80 per cent of fabric mills the company relied on in China were in production mode again as of the final week in February, he said. Sixty-five per cent of Myer's own fashion brands came from Chinese facilities, he added.
But Mr King also said the shortfalls actually had some upsides for Myer.
"It's a great opportunity to actually destock and focus on how much inventory you really need," he said. "It's given our buying teams and merch(andise) teams some food for thought in how we flow merch in. I see it as cash flow opportunity in the short term. In the long term, we'll see what happens," he said.
Statistics on the total number of cargo containers shipped in to the country are compiled twice a year by Ports Australia, and no data on 2020 had yet been received, a spokesman said.
A NSW Ports spokeswoman said that container volumes in the Port Botany facility for January 2020 were down about 5 per cent on 2019 levels, but this was due to a myriad of factors including drought conditions and consumer confidence.
"Given that a reasonable percentage of Port Botany's containerised trade is with China, we have seen disruption to our usual trade flows … as a result of actions being taken within China to mitigate the spread of the coronavirus," the spokeswoman said. "This will impact on volumes for February and March, however as Chinese factories return to work, productivity returns and China's major seaports return to normal, we expect this disruption to reduce."
Port of Melbourne CEO Brendan Bourke estimated that full container volumes for February 2020 would be around six per cent lower than volumes in February 2019.
Economist Tim Harcourt from the University of NSW said the varied range of product delays was partly attributable to the fact that Wuhan, the epicentre of the coronavirus epidemic in China, had a broad base of manufacturing.
"Wuhan is the Chicago of China," he said. "It's not Detroit. It doesn't do just one thing. It's got iPhones, it's got automotive, it's got large scale manufacturing across quite a few sectors."
The slowdown on trade raises an interesting question: is Australia too reliant on China for its consumer goods?
Mr Harcourt pointed out that Australia imported goods from throughout South East Asia, and therefore was not solely dominated by China, but also "this might be the moment when we decouple a bit from Chinese dependence, to the benefit of both countries".
"China has been trying to go through this transition from being a nation of shippers to a nation of shoppers," he said.
"They were this big shipping, export-everything, low-cost manufacturing exporter. Now they want to be this high-value-added, internal consumption, internal investment nation of shoppers. So in some ways this will help their transition," he said.
University of Melbourne economist Dr Lusheng Shao said coronavirus would likely just be a short term one-off disruptive event for the Chinese economy, a bit like the 2011 tsunami was for the Japanese automotive industry.
"In the long run the economy will go back to normal," he said.
But with regard to product shortages in necessary categories like pharmaceuticals, he said, "there should be some sort of back-up strategy to deal with this kind of situation."