At a high level, the answer is simple. The second half of the year is filled with 'celebrations'. Back to school (BTS), Halloween, Thanksgiving, and Christmas - which are all massive sales events. For example, 2021 holiday sales were nearly $890B, according to the National Retail Federation. BTS sales in the US this year alone are projected to be $34B, according to Deloitte.

Less understood, however, is the buildup to peak. Using 2022 BTS as an example, most importers placed their orders for BTS with their suppliers back in January 2022. This allows them to account for the time it takes to manufacture the product, ship it, receive it, and have it in stores by July 5. You can see the detail in the graphic below.

The net effect is that we typically have a “slow” season from January through May. There are a couple of small spikes during this time (like the buildup to Chinese New Year). However, the year typically breaks out to approximately 40% of the total annual volume shipped in the first six months and 60% in the second half. Even that is a bit misleading as the first few months of the year are especially slow, building up to May and June when BTS ships. Conversely, July through September are especially strong.

This is becoming a hot topic for a couple of reasons. The first is that carriers are pressing importers for equal, year-round volume commitments. While this is possible for some importers…in general, it isn't realistic for the reasons cited above. Importers don't import products for demand that doesn't exist in the first half of the year. The second reason it is a hot topic is the pressure this puts on supply chains every year. This second half spike of course requires more space, equipment, and staff, which puts massive strain on the global supply network. The infrastructure (port, carriers, equipment) simply has a hard time contending with a lull, followed by a peak.

As we know, the pandemic completely altered this pattern. In March 2020, demand suddenly stopped. When it restarted, it was “supercharged” by a massive influx of cash into the economy. Trillions of dollars of stimulus spending coupled with stay at home restrictions created a spending boom unlike any other we have seen in modern history. It completely disrupted and distorted historic shipping patterns. This in turn led to unprecedented challenges for importers, and record profits for carriers.

I am not an economist, however all signs are indicating that things will “normalize” in 2023, meaning volumes will slow down in January through May as they normally do, then build back up to a peak from June through October. The open question if this does occur. How will the carriers and the related infrastructure respond?

What do you think?