Eight Reasons Why Consumer Fireworks Retailers Are Very Concerned for The 4th Of July Season

By: Chris Reese

“It’s always something”, is the saying every year for consumer fireworks retailers. For 2020 we had to deal with COVID-19, industry shortages, and regulation changes in China that would most certainly increase prices and availability of items for 2021. There are always delays, issues with the supply chain, and constant threats to move the industry into chaos. But what transpired in 2020 set off a chain reaction that will have substantial negative implications for the industry for years to come. No doubt this will be the most challenging year in the history of the consumer firework industry and will likely alter the industry forever. Listed below are the 8 reasons why retailers and consumers should be genuinely concerned.

• Metal Cages and The Reclassification of Larger Consumer Items

In a surprise announcement last year China arbitrarily decided that any firework with a tube size of 30mm or greater will be reclassified as 1.3 professional fireworks. As a result, these items will have to be wrapped in a metal cage significantly increasing their cost. The bottom line is these items will be so expensive that they will be met with price resistance from the consumer and will most likely be phased out of production soon. Fireworks with low shot counts (large shells) offer unmatched performance in height, special effects, and break size. Those massive breaking effects that people love to see will price themselves out of the market and fade into history. Be sure to check out our October 2020 blog post to get all the specific details on how reclassification will change the product and industry forever.

• US Port Delays

As of this blog post ships full of containers are wandering in the ocean off California waiting to doc. There is a tremendous back log as the ports are short on workers due to the pandemic. Unfortunately, that shortage extends into the entire supply chain from rail and freight. What normally takes about 2 weeks to receive a container once it hits the port is now taking up to 2 months. This problem is not unique to the fireworks industry. Now more than ever consumers are shopping at Amazon, Walmart, and other big retailers online in the comfort of their homes. As retailers are seeing diminished stock, they are submitting some of the largest orders in history. With a depleted supply chain, it’s causing a traffic jam of epic proportions. Specifically, for consumer firework retailers, containers must be shipped by early April or its likely they won’t be delivered in time for the July 4^th season which is devastating because the July the 4^th season accounts for 60 to 100% of yearly gross revenues.

• Limited space on shipping vessels

Delivering your container once it hits the port is one thing, but actually getting it on the boat and shipping it to the US is growing more worrisome by the day. Shipping vessels can only set aside a small amount of space to ship hazardous materials. Since consumer demand is at an all-time high, space for any consumer goods is extremely limited. Of the limited space available for consumer fireworks TNT has a pact with the Chinese government and therefore 50% of the limited shipping space is monopolized by one company. As a result, many importers, wholesalers, and retailers are worried that the product won’t arrive until after the 4^th this year and this has created a bidding war to get companies’ orders shipped before the window of opportunity passes.

• Shortage of shipping containers

With a dramatic increase in demand from China, retailers are experiencing severe delays in transit times. Unfortunately, this means that many of the containers needed to fill orders from China are tied up in the US. The fact is there is a huge trade imbalance with China, so the containers are sitting in the US waiting to be filled with US goods to be exported. However, with little exports shipping to China, empty containers are piling up in the US. With no empty containers available in China fireworks can’t be shipped to the US.

• Short production season

With product piling up and hitting capacity in the factory warehouses due to the logistical issues stated above, factories were forced to close 10 days early this year for Chinese New Year. This means when the factories open back up in March importers/retailers will only have four weeks to get product produced and shipped in order to receive it in time. A shorter than usual production season means certain products will not be manufactured and other fireworks will have lower supply quantities. Combine that with the largest orders in consumers fireworks history because of historic inventory lows at wholesaler warehouses, Chinese factories will not be able to meet demand.

• Bidding wars

Its not a secret that China’s economic activities are somewhat scrupulous, and you can get just about anything you want if you’re willing to pay the price. With historic demand shipping has become a bidding war with various importers willing to pay as much as 200% to 300% more in shipping costs just to ensure their product finds its way onto a shipping vessel in time for the July 4^th season. As we get closer to the season there is no doubt that the war will rage on and shipping costs will only escalate.

• Value of the US Dollar

Unfortunately, the flood of economic relief and stimulus in the US had devalued the US dollar. With the pandemic still raging in the US, we have had a much more difficult recovery than China. So far in 2021 COVID-19 has had little impact on the Chinese economy. As a result, the US dollar has weakened against the Yen. Further weakening is expected moving forward driving up product costs about 10-15% over what was expected in 2020.

• Impact on the industry and consumer

As I write this article prices are rising almost weekly and supply in the US is at an all-time low while consumer demand is at an all-time high. Containers loaded with fireworks are trickling in and while the industry expects shipping volumes to increase in the upcoming weeks there is limited space available which means wholesalers/retailers/importers expect to receive only 60 to 80% of their orders. What arrives before the 4^th is still up for debate. But regardless this is going to come at an enormous cost to the consumer. Retail prices across the country should rise about 30% to as much as 100% on some products.  That means that consumers who spend $100 in fireworks every 4^th of July will probably on average get about $50 to $70 worth of fireworks that they normally purchase. Unfortunately, if supply is significantly less than projected prices may increase as much as 40% to 150%!

So, what should you do if you plan to buy fireworks this year?

Shop early: Shortages will mean that products that are normally well stocked will be in short supply and as the season gets closer prices will only continue to increase. Fireworks don’t have a shelf life so stocking up now will save you some serious cash.

Contact your retailer in May: By late April or early May your retailer will have a good grasp on what products will arrive in time for the 4^th season, the % of price increase, and what will be in short supply.

Pay in cash: Retailers won’t be motivated to offer huge discounts or special promotions this year due to the increased cost. But cash is always appreciated due to high credit and debit processing fees which means your retailer might be willing to cut you a better deal when paying with cash.

How is Xtreme Fireworks Prepared? In regard to Xtreme Fireworks we expect some minor price increases this year but we are well stocked for the upcoming season and do not expect any significant shortages on product availability.

In an upcoming blog post I will explore how this will continue to impact the consumer fireworks industry in the future. Unfortunately, there is even more turmoil ahead as more volatility is expected.