Small retailers are facing higher shipping costs this holiday season, and some say the increases are cutting into or erasing their profits.
Jenni Shields, owner of Evie Pearl Handmade, said she paid $2.93 to ship an order when she started her business eight years ago. Last year, an average shipping label for her products cost about $4.50. Last month, she said, a typical batch of orders at her local U.S. Postal Service office in Kansas City, Kansas, averaged nearly $6 per package. She charges customers $6 in shipping, which includes about $1.50 for packaging. Shields said she is now losing money on orders and considering a first shipping fee increase in six years.
The report links the increase to higher fuel prices since the U.S. and Israel attacked Iran in February. Amazon reported an 11% rise in shipping expenses in the third quarter compared with last year. Freightos, a transportation marketplace, put global air cargo at about $3.37 per kilogram, up 43% from a similar period a year ago. Judah Levine, Freightos' head of research, also cited demand for fast shipping of data center hardware as a factor.
Jason Seidl, a transportation analyst at TD Cowen, said larger companies are often insulated because they use dedicated shipping contracts rather than the spot market. Smaller companies lack that protection.
Todd Shelton, founder of a 23-year-old New Jersey clothing company, said he started charging customers for return shipping this week for the first time, deducting the cost from refunds. He said his material costs have also risen and that he is considering higher prices or charging for shipping.
UPS, FedEx and USPS have all instituted holiday surcharges that run through the end of the season. The National Retail Federation expects holiday retail sales to grow 4.2% to $1.01 trillion, compared with $972 billion last year. Aaron Cheris, global retail practice head at Bain & Company, said some of that growth reflects inflation rather than added purchases, and that shipping costs are on track to set a record this year. He said many smaller retailers could face financial distress in the first quarter of next year.